CSj April 2017
Accountability Making it personal Managers in Charge Regime Governance reform CG Code compliance
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The Hong Kong Institute of Chartered Secretaries 香港特許秘書公會 (Incorporated in Hong Kong with limited liability by guarantee) Good governance comes with membership April 2017 About The Hong Kong Institute of Chartered Secretaries CSj, the journal of The Hong Kong Institute of The Hong Kong Institute of Chartered Secretaries (HKICS) is an independent professional body dedicated to the Chartered Secretaries, is published 12 times a year promotion of its members’ role in the formulation and effective implementation of good governance policies, as well by Ninehills Media and is sent to members and as the development of the profession of the Chartered Secretary in Hong Kong and throughout Mainland China. HKICS students of The Hong Kong Institute of Chartered was first established in 1949 as an association of Hong Kong members of the Institute of Chartered Secretaries and Administrators (ICSA) of London. It became a branch of ICSA in 1990 before gaining local status in 1994. HKICS is a Secretaries and to certain senior executives in the founder member of the Corporate Secretaries International Association (CSIA) which was established in March 2010 in public and private sectors. Geneva, Switzerland to give a global voice to corporate secretaries and governance professionals. HKICS has over 5,800 members and 3,200 students. Views expressed are not necessarily the views of The Hong Kong Institute of Chartered Secretaries Council 2016/2017 Committee chairmen or Ninehills Media. Any views or comments are for Ivan Tam FCIS FCS – President Audit Committee: reference only and do not constitute investment Dr Gao Wei FCIS FCS(PE) – Vice-President Ernest Lee FCIS FCS(PE) or legal advice. No part of this magazine may be Paul Stafford FCIS FCS(PE) – Vice-President Education Committee: reproduced without the permission of the publisher Dr Eva Chan FCIS FCS(PE) – Treasurer David Fu FCIS FCS(PE) or The Hong Kong Institute of Chartered Secretaries. Human Resources Committee: Professor Alan Au FCIS FCS Dr Maurice Ngai FCIS FCS(PE) Circulation: 8,200 David Fu FCIS FCS(PE) Membership Committee: Annual subscription: HK$2600 (US$340) Ernest Lee FCIS FCS(PE) Dr Eva Chan FCIS FCS(PE) To subscribe call: (852) 3796 3060 or Stella Lo FCIS FCS Nomination Committee: email: [email protected] Gillian Meller FCIS FCS Edith Shih FCIS FCS(PE) Paul Moyes FCIS FCS(PE) Professional Development Committee: Editorial Committee Bernard Wu FCIS FCS Paul Stafford FCIS FCS(PE) Kieran Colvert Low Chee Keong Wendy Yung FCIS FCS Mohan Datwani Philip Miller Secretariat Paul Davis Samantha Suen Dr Maurice Ngai FCIS FCS(PE) - Past President Samantha Suen FCIS FCS(PE) Chief Executive Lydia Kan Li Zhidong Edith Shih FCIS FCS(PE) – Past President Mohan Datwani FCIS FCS(PE) Senior Director and Head Ernest Lee of Technical & Research Membership statistics update Louisa Lau FCIS FCS(PE) Registrar As of 28 February 2017, the Institute’s Credits Candy Wong Director, Education and Examinations membership statistics were as follows: Kieran Colvert Harry Harrison Lydia Kan FCIS FCS(PE) Director, Professional Development Students: 3,401 Editor Illustrator (cover) Carman Wong FCIS FCS(PE) Company Secretary Graduates: 512 Ester Wensing Images Karen Ho Senior Manager, Finance and Accounting iStockphoto Associates: 5,057 Art Director Lawrence Wong Senior Manager, Marketing & Fellows: 579 Communications Contributors to this edition Kenneth Jiang FCIS FCS(PE), BRO Chief Representative Veronique Marquis, Catriona Kellas Eversheds The Hong Kong Institute of Chartered Secretaries Tom Lu Lim, Sara Or (Incorporated in Hong Kong with limited liability by guarantee) Mayer Brown JSM 3/F, Hong Kong Diamond Exchange Building, 8 Duddell Street, Central, Hong Kong Tel: (852) 2881 6177 Fax: (852) 2881 5050 Kanus Yue PwC Hong Kong Email: [email protected] (general) [email protected] (professional development) Timothy Loh [email protected] (member) [email protected] (student) Timothy Loh LLP Website: www.hkics.org.hk Beijing Representative Office Advertising sales enquiries Rm 15A04, 15A/F, Dacheng Tower, No 127 Xuanwumen West Street Ninehills Media Ltd Xicheng District, Beijing, 100031, China Tel: (852) 3796 3060 Tel: (86) 10 6641 9368 Fax: (86) 10 6641 9078 Email: [email protected] Jennifer Luk Institute of Chartered Secretaries and Administrators Email: [email protected] Frank Paul Governance Institute of Governance New Zealand The Institute of Chartered Australia PO Box 444 Secretaries & Administrators Email: [email protected] Level 10, 5 Hunter Street Shortland Street c/o MCI UK Sydney, NSW 2000 Auckland 1015 Durford Mill, Petersfield Ninehills Media Ltd Australia New Zealand Hampshire, GU31 5AZ 12/F, Infinitus Plaza Tel: (61) 2 9223 5744 Tel: (64) 9 377 0130 United Kingdom Fax: (61) 2 9232 7174 Fax: (64) 9 366 3979 Tel: (44) 1730 821 969 199 Des Voeux Road Sheung Wan Chartered Secretaries Canada 202-300 March Road The Singapore Association ICSA: The Governance Institute Hong Kong Ottawa, ON, Canada K2K 2E2 of the Institute of Chartered Saffron House, 6-10 Kirby Street Tel: (852) 3796 3060 Tel: (1) 613 595 1151 Secretaries & Administrators London EC1N 8TS Fax: (852) 3020 7442 Fax: (1) 613 595 1155 149 Rochor Road United Kingdom #04-07 Fu Lu Shou Complex Tel: (44) 20 7580 4741 Internet: www.ninehillsmedia.com The Malaysian Institute of Singapore 188425 Fax: (44) 20 7323 1132 Email: [email protected] Chartered Secretaries and Tel: (65) 6334 4302 © Copyright reserved Administrators Fax: (65) 6334 4669 The Institute of Chartered ISSN 1023-4128 No. 57 The Boulevard Secretaries & Administrators Chartered Secretaries Southern Mid Valley City in Zimbabwe Lingkaran Syed Putra Africa PO Box CY172 PO Box 3146 59200 Kuala Lumpur Causeway Harare Houghton 2041 Malaysia Zimbabwe Republic of South Africa Tel: (60) 3 2282 9276 Tel: (263) 4 702170 Tel: (27) 11 551 4000 Fax: (60) 3 2282 9281 Fax: (263) 4 700624 Fax: (27) 11 551 4027 Contents
Cover Story Senior management accountability and enforcement 06 Veronique Marquis and Catriona Kellas, of Eversheds, assess the implications of the Securities and Futures Commission’s ‘Managers in Charge Regime’ designed to strengthen senior management accountability in Hong Kong.
In Profile Keeping companies honest 12 The winner of the HKICS Prize 2016, Gordon Jones FCIS FCS BBS, Hong Kong’s former Registrar of Companies, points out that writing the rule book is only the beginning of the long journey to good governance.
Sponsor's Feature Cracking the Corporate Governance Code 16 Kanus Yue, Risk Assurance Partner, PwC Hong Kong, highlights the findings of a recent PwC study designed to assist listed companies to comply with the requirements of Hong Kong’s Corporate Governance Code.
Technical Update New governance standards for authorised insurers 22 Tow Lu Lim and Sara Or, Partners of Mayer Brown JSM in Hong Kong, assess the implications of the new guidance note issued by the Office of the Commissioner of Insurance imposing more stringent corporate governance standards on authorised insurers in Hong Kong.
Price-sensitive information and the Market Misconduct Tribunal 28 Timothy Loh, Managing Partner, Timothy Loh LLP, provides guidance to listed companies and their directors on the workings of the Market Misconduct Tribunal and enforcement actions by the Securities and Futures Commission.
HKICS News
President’s Message 04 Institute News 32 Student News 42 Bulletin Board 47 Careers 49 President’s Message
The year ahead
Hong Kong and were at the top of the for conferences and seminars in 2016 and agenda of our Council strategy meeting will seek to enhance the app further. held in February this year. Our priority at the moment is to ensure that you have all Finally, we also intend to put more resources the information you need to make your own into developing the profession in Mainland decision on the way forward. ICSA will be China. We currently have 183 registered sending out information relating to these students, 38 members and 163 Affiliated strategic changes in the coming months and Persons (AP) from H share, A+H share, we also plan to organise a series of forums A share and red chip companies on our and meetings to inform members and register. I believe we can expand our AP stakeholders of these strategic changes. programme, our student numbers and our membership base in Mainland China, but to Turning to other initiatives for the year do this we would need to expand our teams ahead, we will be seeking to maintain the working in the Mainland. his month’s CSj addresses the global momentum of our social responsibility T trend towards enforcing personal initiatives by focusing on specific social There are many potential areas where we accountability for senior managers. In my issues, including community economic could enhance our work. For example, the President’s Message this month, however, development, education, environment and Institute worked with the Open University I would like to focus on some important employee well-being. We at the HKICS of Hong Kong to launch the Postgraduate developments regarding the Institute of believe strongly in caring for our local Programme in Corporate Governance in Chartered Secretaries and Administrators community with the knowledge that ‘to Shanghai in 2016. This successful launch (ICSA) and to update you on some of the give is more blessing than to receive’. This was a milestone for the Institute’s Mainland initiatives we have in the pipeline for the year, we are working towards obtaining professional development and 29 students year ahead. the 2017/2018 Caring Organisation Logo are now registered with this programme. organised by the Hong Kong Council of I would like to see more collaboration As mentioned in the report of the Council Social Services in recognition of our work with universities in the Mainland offering of ICSA dated 16 August 2016, the Council with several NGOs, such as the Hong corporate governance courses. of ICSA has been evaluating a number Kong Breast Cancer Foundation, Ocean of strategic changes to ensure that ICSA Conservancy and the World Wildlife Fund. Another proposal is to form local can be a healthy, growing and sustainable committees in the Mainland to address the professional institute into the future. Another focus of our work in the year ahead local issues of relevance to board secretaries As you may know, one of the important will be to closely monitor social media trends in their work. The Institute has five Regional developments is that ICSA has been and shift our communication channels Board Secretary Panels (RBSPs) in Beijing, reviewing the International Qualifying to social media platforms to encourage Shanghai, Guangzhou, Shenzhen and Scheme to ensure it is fit for purpose in more interaction and engagement with our Chongqing which serve as local hubs for APs the changing business landscape. At the students, members and the general public. working and living in those regions. We will ICSA Council Meeting held last month in continue to engage conveners and members Johannesburg, South Africa, a decision I would also like to update you on our use of these RBSPs and consider setting up was taken to expand the qualification into of financial resources. We are currently in a other relevant local committees, panels or two streams – Chartered Secretaries and strong financial position and therefore have working groups to further enhance our work Chartered Governance Professionals. ICSA the ability to expand our funding of priority and services in the Mainland. also proposes to create a new entry-level areas of our work. These will include category of membership to attract younger projects to provide further assistance to I believe these developments will not and aspiring professionals to be called our students. We have been providing only benefit our members and APs in the Affiliated Members. Any ICSA Division online study packs free of charge since Mainland but also our members here in wishing to offer Affiliated Membership, January 2017, but we would like to put Hong Kong since it will open up insights into or to register Affiliated Members, must more resources into aiding our students Mainland professional development issues. first apply for, and receive, authorisation with their studies. from ICSA Council. ICSA will seek member approval of both strategic changes at We also intend to make more use of digital its upcoming Annual General Meeting platforms to reach out to our members, tentatively to be held in early October 2017. stakeholders and potential students. This will involve upgrading our IT database system to These developments will have significant enable it to provide more efficient services implications for our members here in to our members. We created a mobile app Ivan Tam FCIS FCS
April 2017 04 President’s Message
來年展望
期月刊的主題，是全球各地推行 展、教育、環境及僱員健康生活。公 我們亦有許多方面的工作可以加強。 本高級管理人員個人問責的趨勢。 會秉持關懷社區的信念，深信「施比 例如公會與香港公開大學合作，於 不過，本文擬集中報告特許秘書及 受更有福」。今年，我們將憑藉與香 2016年在上海推出高級企業管治研修 行政人員公會 (ICSA) 的一些重要發 港乳癌基金會、海洋保育協會和世界 課程，十分成功，是公會內地專業發 展，以及公會來年的一些工作計劃。 自然基金會等志願機構的合作，尋求 展的里程碑，現有29名學員註冊修讀 獲得香港社會服務聯會的2017/2018同 這課程。我樂見公會與內地大學進行 正如ICSA理事會2016年8月16日的報告 心展關懷標誌。 更多合作項目，提供公司治理課程。 所指，ICSA理事會一直考慮進行一些策 略性改變，務求讓ICSA健全發展，穩步 來年的另一工作重點，是密切留意社 另一項建議，是在內地成立地區委員 成長，成為可持續的專業機構。正如 交媒體的發展趨勢，轉移以社交媒體 會，處理與當地董事會秘書工作息息 大家所知，當中一項重要發展，是檢 平台作為溝通途徑，以加強與學員、 相關的課題。公會設有北京、上海、 討國際專業知識評審考試，確保課程 會員和公眾人士的互動，鼓勵他們參 廣州、深圳及重慶五個地區董事會秘 能配合轉變中的商業社會的需要。上 與公會事務。 書小組，凝聚在這些地區工作和居住 月在南非約翰內斯堡舉行的會議中， 的聯席成員。我們將與董事會秘書小 ICSA理事會決定把有關會員專業資格分 另一項為大家報告的事項，是公會財 組的召集人和成員保持緊密聯繫，並 為特許秘書及特許管治專業人員兩個 務資源的運用。公會目前財務狀況穩 考慮成立其他有關的地區委員會、專 組別。ICSA同時建議新增入門水平的 健，可投入更多資金開展重點工作。 責小組或工作小組，以加強公會在內 會籍，取名為聯席會員，以吸引較年 當中包括多個項目，為學員提供進一 地的工作和服務。 輕及有志發展的專業人士。ICSA分部 步協助。自2017年1月起，我們已開始 如欲提供聯席會員類別，或登記聯席 在網上免費提供學習工具包；未來將 我相信這些發展不僅對內地會員和聯席 會員，須事先向ICSA理事會申請並獲批 投入更多資源，協助學員學習。 成員有所幫助，香港會員也可從中得 准。ICSA將在下次周年會員大會把這 益，加深對內地專業發展事務的認識。 兩項策略性改變提交會員通過，大會 我們也計劃多利用數碼平台接觸會 初步訂於2017年10月初舉行。 員、持份者和潛在學員，這需要提升 我們的資料庫系統，以便為會員提供 這些發展對香港會員影響深遠，是公 更有效率的服務。2016年，我們推出 會理事會2月份策略會議的重要討論項 了研討會及講座流動應用程式，來年 目。公會此刻的首要工作，是讓會員 將再提升這程式。 掌握一切所需資料，決定個人取向。 在未來數月，ICSA將提供有關這些策 最後，我們亦擬投入更多資源，推動特 略性改變的資料；我們亦計劃舉辦一 許秘書專業在中國內地的發展。公會目 系列論壇和會議，向會員及持份者說 前有183名註冊學員、38名會員及163名 明這些改變。 聯席成員來自H股公司、A+H股公司、 A股公司及紅籌公司。我相信我們可擴 至於來年的其他工作，我們將繼續推 展聯席成員計劃，增加內地學員數目， 動企業社會責任方面的項目，集中關 擴大內地會員的基礎；但要做到這些工 注特定的社會事務，包括社區經濟發 作，則需要擴充我們內地的團隊。 谭国荣 FCIS FCS
April 2017 05 Cover Story
Senior management accountability and enforcement The SFC’s ‘Managers in Charge Regime’
April 2017 06 Cover Story
This month sees the implementation of the Securities and Futures Commission’s (SFC’s) ‘Managers in Charge Regime’ (MICR) for all licensed corporations. Veronique Marquis and Catriona Kellas, of Eversheds, look at the compliance implications for organisations caught by the MICR and the wider implications of the SFC’s intention to strengthen senior management accountability in Hong Kong.
n 16 December 2016 the SFC relevant seniority and authority to should include information as to Opublished a circular and FAQ properly supervise the relevant function reporting lines, responsibilities, and document introducing measures designed and report to the board of the licensed the roles and accountability of senior to heighten the accountability of senior corporation. MICs are personally management personnel. Whilst this managers in licensed corporations. The accountable for their relevant functions. document does not need to be formally circular clarifies the existing liability of Potential sanctions include disciplinary submitted to the SFC, the SFC may senior managers, and introduces new action and civil and criminal penalties. request sight of it at any time. corporate governance requirements which apply to all licensed corporations. For most core functions, MICs are not Licensed corporations must submit The MICR will come into effect on 18 required to be ‘responsible officers’ (ROs). details of all MICs and an organisational April 2017 and there is a hard deadline There are two exceptions: MICs in respect structure chart showing certain prescribed of 17 July 2017 for compliance with the of the ‘overall management oversight’ details on the SFC online portal by 17 July key aspects of the regime. It is expected and ‘key business line’ functions will 2017. The information must be regularly that corporations will need to dedicate need to be (or to become) ROs. To the reviewed and kept up to date. resources immediately in order to meet extent that managers occupying these the SFC’s challenging deadlines. two core functions are not currently The regime also requires that MICs ROs, licensed corporations have until 16 formally acknowledge their appointment, The SFC has made governance and October 2017 to apply for RO status in and the scope of their roles and accountability a priority in terms of respect of those individuals. responsibilities. ongoing supervision and enforcement. The new MICR serves to emphasise that One of the key components of the new Timeline this focus is unwavering and heralds an regime is the requirement for the board The SFC has prescribed a short period of era of increased personal accountability to adopt a formal document setting time for licensed corporations to satisfy for management in Hong Kong. The out the management structure of the the new regime, with a three-month regime echoes the similar UK Senior corporation. This formal document window from 18 April to 17 July 2017 Managers Regime which came into force in March 2016, and the sharp focus on Highlights individual accountability in the US.
Key elements of the new regime • the SFC’s new Managers in Charge Regime is part of a global trend towards The regime requires licensed corporations enforcing personal accountability to appoint at least one ‘manager in charge’ (MIC) in respect of each of the • the principal deliverable of the new regime is a chart setting out which eight new ‘core functions’ (see graphic senior manager is responsible for each of the eight core functions specified below). by the regime • senior managers should note that disciplinary sanctions available to the SFC MICs need to be fit and proper under are both civil and criminal in nature pre-existing rules, and to have the
April 2017 07 Cover Story
to satisfy the mandatory requirement to Even more challenging is the scenario Corporations that have gone through submit information as to management where core functions, such as IT, are fully the similar Senior Managers Regime in structure (see table below). outsourced to external service providers, the UK, which provided inspiration for and where no senior manager currently the MICR, will remember all too well Licensed corporations who need to apply has the required degree of oversight over that the drawing of responsibilities for their newly appointed MICs to become that function. While the SFC has left the maps can be fraught and require ROs will benefit from a three-month door open to outsourced MICs, it has not sensitive management. grace period to submit their application waived the requirements that all MICs, in that respect to 16 October 2017. Still, including any outsourced ones, must Enforcement: impact of the regime this compressed timeline is expected to have seniority, authority, and a direct on senior management accountability present a challenge for many licensed reporting line to the board. In practice, The SFC has made it clear that it corporations. few outsourcing scenarios will lend wants to strengthen the corporate themselves to the outsourcing of MIC governance of licensed corporations. Various factors can complicate compliance responsibilities. The personal responsibility element with the regime. Corporations that are of the MICR is the cornerstone of parts of larger groups of companies, The most difficult part of the regime this approach, and is mirrored in the where back or middle office functions are will likely be the demarcation of SFC’s enforcement priorities. In its discharged by other corporate entities responsibilities between various MICs. Enforcement Reporter published on within the group, need to prepare the For corporations that operate on matrix 8 December 2016, the SFC gave a terrain and start a dialogue with any non- management models, with various dotted warning shot, requiring corporations employees that they believe are fulfilling reporting lines, or where key business to ensure that ‘senior management core functions, and to ensure that the lines are overseen by multiple managers, (whether or not licensed by us) are fully relevant individuals will be prepared to there will need to be clarity over each aware that they are accountable for formally acknowledge their appointment. MIC’s scope of responsibility, with no the misconduct of their firms’. Clearly In many cases, specific training will be grey areas remaining. Such an exercise the SFC hopes that a combination of required to ensure new MICs understand requires careful planning and meticulous the new regime and the SFC’s existing their role and discharge their duties under execution, as well as stakeholder enforcement powers, will help to the regime. engagement from an early stage. drive the financial services industry
The eight ‘core functions’ and examples of who can be appointed as MICs
Core function Relevant MIC Overall management oversight Chief Executive Officer, President Key business line Chief Investment Officer, Head of Equity, Head of Corporate Finance, Chief Rating Analyst, Head of Fund Marketing Operational control and review Chief Operating Officer, Head of Operations, Head of Internal Audit Risk management Chief Risk Officer, Head of Risk Management Finance and accounting Chief Finance Officer, Financial Controller, Finance Director Information technology Chief Information Officer, Head of Information Technology Compliance Chief Compliance Officer, Head of Legal and Compliance AML and CTF Head of Financial Crime Prevention, Head of Compliance
April 2017 08 Cover Story
Countdown to compliance
18 April 2017
17 July 2017 SFC starts collecting management structure information 16 October 2017 Latest day to submit management structure information via the SFC Online Portal Relevant MICs expected to have applied for approval as ROs
in Hong Kong further towards attaining individuals under the MICR. No new that they were not aware of the extent an exemplary standard of responsible guidance has been provided, and the SFC of their responsibility. In that sense, the conduct and investor protection. has reiterated that each scenario will be MICR provides a roadmap to enforcement analysed on its individual facts. The SFC will against senior managers. Despite this, the SFC has made it clear be looking to establish where responsibility that it considers the MICR to be within for breaches lie, and the degree of Five things you need to know the ambit of its existing powers, and responsibility borne by each member of that no new regulation or legislation senior management. Various factors will be is required for its implementation. This taken into account, including: 1. The new regime applies to all is particularly interesting considering licensed corporations. that the MICR turns the spotlight on • the extent of each individual 2. The deadline for complying is 17 middle and back office functions, such manager’s authority in the firm’s July 2017. as IT and compliance, which have not business 3. The new regime highlights traditionally been associated with senior personal accountability and accountability. It is fair to say that, • the individual’s level of responsibility liability for front office, middle although the SFC may have had the ability within the licensed corporation office and back office managers. to pursue enforcement action against concerned, including any supervisory personnel in those functions, historically duties he or she may perform, and 4. Implementing the new regime their focus has been trained on the may require significant front office. However, the SFC’s decision • the level of control or knowledge resources, particularly for groups to predicate the MICR on the basis of he or she may have concerning any of companies, corporations their power to pursue regulated persons failure by the licensed corporation or operating in multiple (see ‘The underlying regulatory regime’, persons under his or her supervision, jurisdictions and organisations below), regardless of whether the relevant to follow the Code of Conduct. which adopt matrix individuals are licensed or not, signals management (with multiple or that the pool of those who may be held to Regulators have long decried the difficulty dotted reporting lines). account could be dramatically expanded. to ascertain and allocate responsibility in 5. Potential civil and criminal It is expected that enforcement action will the event of a breach. Since the principal sanctions can apply to follow an upward curve. deliverable of the MICR is an organisation personnel who may not and responsibility chart, in the future, previously have considered As ever, it is difficult to be definitive as to the SFC should find it much easier to themselves to be within the the circumstances in which the SFC will exercise disciplinary powers against SFC’s enforcement remit. seek to take enforcement action against individuals who will be unable to claim
April 2017 09 Cover Story
also be guilty of misconduct if the and XIV of the SFO (such as false trading, misconduct arose through their conduct, price rigging, market manipulation and in the future, the SFC or with their consent or connivance, disclosure of misleading information), the should find it much or as a result of their negligence. SFC may seek to extend criminal liability easier to exercise ‘Misconduct’ in this context includes an to any of the corporation’s officers, or act or omission relating to the carrying partners in a partnership, where the disciplinary powers on of any regulated activity, which is offence is committed with their consent, against individuals who or is likely to be prejudicial to the connivance or otherwise attributable to interest of the investing public or to their recklessness. The criminal liability of will be unable to claim the public interest. officers in such cases carries a sanction that they were not of a maximum 10 years imprisonment Outside of these statutory powers, it is and fines of up to HK$10 million (Section aware of the extent of worth bearing in mind that a failure to 390 SFO). ‘Officers’ includes directors, their responsibility ensure compliance with the MICR may managers, company secretaries, or any in itself call into question an MIC’s own person involved in the management of fitness and properness. the corporation – which, again, would presumably include all MICs. The underlying regulatory regime: what Senior managers should note that are the penalties? disciplinary sanctions available to the SFC Extra-territoriality Under Part 9 of the Securities and Futures are both civil and criminal in nature. The disciplinary powers under Part 9 of Ordinance (SFO), the SFC may exercise the SFO apply to all regulated persons. its disciplinary powers to sanction a Civil liability under Part 9 of the SFO is set Importantly, these powers do not ‘regulated person’ if the person is guilty out in Section 194 of the SFO and includes differentiate between regulated persons of misconduct or is considered not fit and the following disciplinary sanctions: caught within the SFO definition wherever proper ‘to be or to remain the same kind they are located. Enforcement risk of regulated person’ (see Section 194 of • fines not exceeding HK$10 million therefore applies equally to MICs located the SFO). Importantly, the term ‘regulated or three times the amount of the abroad and who may, in practice, have person’ means: profit gained or loss avoided by had – so far – very little exposure to or the regulated person as a result of awareness of the SFC’s regulatory regime. • a licensed person the misconduct This will have to change, as the regime requires MICs to formally acknowledge • a responsible officer of a licensed • revocation or suspension of their appointment and role definition. person, or the licence How can licensed firms look to support • a person involved in the management • revocation or suspension of their senior managers? of the business of a licensed person approval to be an RO Some licensed corporations will want (regardless of whether he or she is to review the insurance coverage in licensed). As MICs are, by definition, • prohibition of a regulated person from place for directors and officers, and involved in the management applying for licences or registration, consider whether additional cover is of a licensed corporation, they becoming an RO, executive officer or needed for MICs. Typically, directors automatically fall within the ambit relevant individual, and and officers will already be covered for of ‘regulated persons’. civil liability, including the costs of legal • public or private reprimand. representation. However, this cover may Under Section 193(2) of the SFO, not extend to the often problematic early where a licensed corporation is found In addition, where a corporation has been stages of a regulatory investigation, guilty of misconduct, managers may found guilty of an offence under parts XIII before any claim is made. The costs of
April 2017 10 Cover Story
securing independent legal advice for supervision policies and compliance in enhancing stability and confidence in senior managers, which is often needed manuals, among other documents. Hong Kong as a financial market. in those early stages, can be substantial. Some policies only offer a capped cover, What next? Veronique Marquis or will cover only if the individual is With the implementation of the SFC’s Partner and Registered Foreign specifically identified as the target of MICR, Hong Kong becomes the first Lawyer (England and Wales), the investigation. If several managers Asian jurisdiction to adopt a senior Eversheds share the sub-limit, cover can quickly management regime and becomes part prove inadequate. of a global trend towards personal Catriona Kellas accountability. Concerns have been Registered Foreign Lawyer Licensed corporations will also need expressed that the industry will struggle (England and Wales), Eversheds to consider rolling out training with implementing the regime within and enhancing their compliance the given timeframe and to find the For more on the UK’s Senior infrastructure. Implementing the new additional resources that need to be Managers Regime see the regime will mean casting a fresh eye allocated to compliance. Time will tell International Report article in CSj on employment contracts, HR and whether the regime will prove successful September 2016 (pages 24–29).
April 2017 11 In Profile
Keeping companies honest The essential ingredients of a good governance regime
April 2017 12 In Profile
The winner of the HKICS Prize 2016, were incorporated into the draft legislation but, for whatever reason, Gordon Jones FCIS FCS BBS, Hong Kong’s were deleted before the new Companies Ordinance became law. One of these is the statutory disclosure of directors’ remuneration which former Registrar of Companies, was closely was strongly supported by the joint Working Group the government involved in putting in place Hong Kong’s set up with the Hong Kong Institute of Certified Public Accountants. current statutory and regulatory infrastructure. It appeared in the first drafts of the new Companies Bill, but at a later stage the Financial Services and the Treasury Bureau In this interview with CSj, he points out that recommended, in the context of a public consultation exercise, that writing the rule book is only the beginning of it should be deleted. I think the reasons for this were completely the long journey to good governance. erroneous, particularly as it would not have imposed an unreasonable burden on listed companies. This is something which I think we should revisit quickly because directors’ remuneration is a hot topic Congratulations on receiving the HKICS Prize. You have and there is no reason for not making this as transparent as possible. been closely involved in building Hong Kong’s corporate governance infrastructure, particularly in your work on the Other deleted recommendations were the disclosure of directors’ rewrite of the Companies Ordinance – are you happy with substantial property transactions and allowing the inspection of the results of the rewrite exercise? directors’ service contracts by shareholders which were in the White ‘I was pleased that the ordinance was passed by LegCo in July Bill that was vetted by ExCo before the final Blue Bill went before 2012 and implemented in March 2014 – in the present political LegCo. Although these provisions have been part of UK law ever since climate it would be very difficult to get approval for such a major the 1985 Companies Act, they were deleted from the version which legislative reform. was debated by LegCo and I have no idea why this was the case.’
I think the new Companies Ordinance is a huge improvement Do you think Hong Kong’s regulatory infrastructure is basically on the previous Cap 32. We now have a modernised Companies sound? Ordinance which focuses on core company law. All the myriad ‘I think we have basically got the right mix. First and foremost, we’ve provisions regarding corporate administration and management, got the Companies Ordinance providing the statutory provisions which were previously crammed into Part IV of the ordinance, applicable to all companies as the base of the structure followed have now been separated so we now have separate parts on by, at a second level, the non-statutory listing rules with additional directors, company administration and procedure, accounts and provisions for listed companies and, at a third level, the Corporate auditing, shareholder remedies etc. The law has also in many ways Governance Code, which, following the UK model, sets out principles- been brought up to speed in terms of company law and corporate governance developments in other comparable jurisdictions, so I Highlights think it is a huge improvement in terms of structure and content.
One of my principal concerns, however, is that, although there • corporate governance depends more on the people was a commitment to prepare the legislation using the plain running companies than the various structures and English principle, in many places the wording of the new processes you have in place ordinance is anything but plain English. In some places, in particular the accounting and auditing provisions, it is possibly • following best practices in corporate governance even more complex than the previous Cap 32, and you need depends on the key ethical values of decency, fairness, to read the relevant provisions several times before you really honesty and integrity understand precisely what they are trying to say. • company secretaries have to have the courage and ability to speak candidly to the board if they feel that Another area of concern is that the new Companies Ordinance the board is doing something that goes against good doesn’t cover a number of issues which were strongly supported by corporate governance practice the various advisory groups involved in the rewrite exercise. These
April 2017 13 In Profile
corporate governance doesn’t exist in a vacuum, the governance of companies is influenced by the governance of the host society
based corporate governance provisions applicable to listed governance reform is driven by shareholder pressure, but in Hong companies subject to the comply or explain principle.’ Kong it tends to be driven by regulatory pressure. This is partly a cultural issue because, unlike the US, which has a well-established Do you think the principles-based approach is right for and sometimes aggressive investor and minority shareholder Hong Kong and, if so, do you think Hong Kong should move culture, Hong Kong has no culture of minority shareholder further in this direction? activism. That is a major obstacle to having significant corporate ‘Yes, I think so. In fact, if you look at the Corporate Governance governance reform in this particular jurisdiction. Whether or not Code, as a result of reforms over the past few years, most this vacuum can be filled by institutional shareholder activism of the recommendations are code provisions as opposed to remains to be seen.’ recommended best practices, and therefore, subject to comply or explain. Companies have to comply or have to state their reasons Looking beyond the rulebook, how important do you think it for non-compliance. There are very few recommendations that is to have an effective civil society infrastructure in place – are still only recommended best practices and I think that is a in particular an independent judiciary and an active and free move in the right direction. media – to keep companies honest? ‘There is no point in having a good law if it cannot be enforced fairly At the end of the day, corporate governance depends more on and without fear or favour, so you need to have an independent and the quality of the people running companies than the various robust judiciary. Corporate governance doesn’t exist in a vacuum structures and processes you have in place, although these are as the governance of companies is influenced by the governance important. It is possible, for example, to have less than optimal of the host society. In fact, there are a myriad number of factors governance structures and processes but good people on the that influence it – cultural, economic, environmental, legal, political board and still have good corporate governance, but I don’t think and social. There are certain basic things that have to be in place you will have good governance where you have good structures for good corporate governance to take root. For example, as you and processes but bad people. In the case of Enron, they ticked have mentioned, you need to have an effective regulatory and legal all the boxes in terms of good governance practices – for infrastructure; you need to have a good independent and robust example, the company had audit committees and independent judiciary which can administer and enforce the law without fear or directors – but many of the directors were crooks. So I think favour; and, when things go wrong, you need to have a free and principles-based corporate governance is the way to proceed independent media to report on these abuses.’ since it requires that you have good people with sound ethical core principles running companies.’ There has been concern that Hong Kong’s independent judiciary and free media are under threat – do you think they Do you think the principles-based approach is working in can still provide the checks and balances you mention to Hong Kong – some have argued that Hong Kong doesn’t have ensure good corporate and political governance? a sufficiently active and independent shareholder lobby to ‘At the moment, my answer is yes, but this is something we need ensure that the comply or explain mechanism works? to monitor carefully. The two key principles of good corporate ‘I think that is a valid point because, traditionally, corporate governance are accountability and transparency, and these can’t
April 2017 14 In Profile
exist in a totalitarian society. There are clear challenges and where the company is still legally accountable to its shareholders, threats to the continued existence of an independent judiciary that is fundamentally important, but has to take account of and media in Hong Kong. In the case of media, one obvious these other very important constituents like suppliers, customers, concern is the risk of self-censorship as journalists don’t want employees and the community. I don’t think you can legislate that to offend Mainland Chinese interests or, closer to home, strong a company has to be accountable to all of its stakeholders, but it vested Hong Kong interests.’ certainly has to take account of their interests. At the end of the day, it is a question of balancing a whole lot of competing and How important is the element of personal ethics in terms of possibly conflicting interests.’ underpinning good corporate governance? ‘Ethics are of critical importance to good corporate governance. The Could we turn to the role of the company secretary? Do law lays down the basic minimum standards, but companies should you think Hong Kong made the right decision when it opted be doing more than the law requires. Following best practices in to retain the mandatory requirement for all companies to corporate governance is very much a question of your corporate have a company secretary? After all, there are not many culture, mindset and education. It depends on the key ethical jurisdictions globally which have this requirement. values of decency, fairness, honesty and integrity. Now, you cannot ‘Hong Kong is rather unusual in terms of making it a mandatory legislate for these values – the law can provide an appropriate requirement for companies to have a company secretary, but the punishment for wrongdoers but cannot create “goodness” and point is that, even if you don’t have a formal company secretary “good-doers”. This goes back to my earlier point of why it is so position, you still have to have somebody in the company who is important to have good people in key corporate governance roles doing the work of a company secretary, whatever title you give in a company because they are so fundamentally important to the to this role. So, given this, I see no problem with our approach, adoption of good corporate governance by the company. This will and I think there is a lot of clarity in having a specific statutory always be a work in progress because you are always going to have post called the company secretary which has to be filled by bad apples somewhere.’ a professionally qualified person. This is a good rule as far as corporate governance is concerned.’ Can we look at where these issues will be heading in the future? What do you think will be the major governance Do you have any advice for young recruits to the Chartered issues both in Hong Kong and globally in the future? Secretarial profession? ‘I think one of the big areas for development will be corporate ‘The way that the Chartered Secretarial profession and social responsibility. This brings into focus the increasing role corporate governance have developed over the last couple of played by stakeholders in the corporate governance process. decades indicates that this is going to be a very interesting Traditionally, companies were accountable to their shareholders, and challenging career for any young graduate interested in but increasingly companies have to pay far more attention to helping companies improve their corporate governance culture. key constituents such as suppliers, employees, customers and the It is important that people going into the Chartered Secretarial community within which they operate. Another area will be the profession realise that they are the company’s conscience and issue of weighted voting rights (WVR) which challenges the long- must, at all times, maintain a high degree of independence and established principle of one-share-one-vote and linking economic an unbiased approach so that they are equally trusted by both power with voting rights. We have already had a long-running the board and management. They have to have the courage and debate in Hong Kong about whether or not companies with WVR ability to speak candidly to the board if they feel that the board structures should be listed, and this is not going to go away.’ is doing something that goes against good corporate governance practice. They need to have the courage to speak up if they Do you think that this stakeholder focus is rewriting the find that there are regulatory or legal deficiencies that need to social contract under which companies operate? be remedied. That’s not easy if you are faced with experienced ‘If you have a situation where a company is accountable to executive directors who are used to doing things in a certain way.’ different sets of constituents, then basically it will not be accountable to anyone since many of these constituents will have Gordon Jones was interviewed by Kieran Colvert, conflicting interests. So I would re-formulate it as a situation Editor, CSj
April 2017 15 Sponsor's Feature
CGC
April 2017 16 Sponsor's Feature
Cracking the Corporate Governance Code How ready are Hong Kong listed companies to meet the new requirements? There have been numerous changes to Hong Kong’s Corporate Governance Code that require companies to adapt quickly. Kanus Yue, Risk Assurance Partner, PwC Hong Kong, highlights the findings of a recent PwC study designed to assist listed companies to comply with the new requirements of the code.
ompanies face an increasing array is also diverse – we have included one that enables companies to unlock Cof challenges. From the rapid pace companies from the broader Hang Seng value in key areas that will enhance of technological adoption to amplified Index (HSI) and the Hang Seng China management accountability, strengthen industry competition and the recruitment Enterprises Index (HSCEI), as well as internal control and risk management and retention of talent, the number of across four industries (financial services, systems, and improve performance critical issues increases daily. The shifting real estate, retail and technology). It and efficiency. With our experience in regulatory environment adds even provides a baseline of listed company helping companies navigate the new greater complexity – companies must adoption practices in the key areas of risk requirements of the CG code, we have not only spend extensive time and effort management and internal controls. seen examples of how companies have understanding new regulations, but also used this exercise to make themselves understand how the playing field might Second, the study allows companies more nimble and responsive. evolve in the future. to think more deeply and creatively about compliance with the CG code as a Market trends In order to understand the state of Hong value-adding activity. Often times, new From reviewing risk management and Kong listed companies’ adoption of regulations and compliance can turn internal controls disclosures in over 200 the new requirements of Hong Kong’s into a ‘box-ticking’ activity rather than CG reports, some key market trends can Corporate Governance Code (CG code), we have studied the Corporate Governance Highlights Reports (CG reports) of 230 companies in the Hang Seng Index and Hang Seng Chinese Enterprises Index. • the revised Corporate Governance Code highlights the board’s ongoing responsibility to oversee risk management and internal control systems This study has two main goals. First, the report provides directors, executives • the PwC study illustrates diverging patterns of adoption among companies in and managers with a comprehensive different sectors, particularly in the area of risk management practices analysis of how ready listed companies • establishing robust systems and proper processes to deal with the changing are to respond to the new requirements regulations will increase competitiveness and improve relations with investors of the revised CG code. The analysis
April 2017 17 Sponsor's Feature
be identified and categorised into the internal control and risk management to retail (57%) and technology (53%). following five areas: systems. By index, early adoption was While there were some variances in greater among companies in the HSI the sample of companies analysed, it 1. annual review of risk management (86%) compared to the HSCEI (60%). appeared that a majority of companies and internal control systems For examined sectors, financial services have developed a process/approach (80%) and real estate (75%) illustrated to look at internal control and risk 2. risk management system high levels of early adoption compared management systems.
3. internal audit function Summary of the disclosure requirements under the revised CG code 4. management confirmation to the board on systems effectiveness, and SummaryIA – internal of disclosure audit requirements , IC – internal under the revisedcontrol, CGC RMcode – risk management
5. other disclosures in CG reports. Establishment of IA Confirmation from function management
1. Annual review of risk management Significant areas of Frequency and period of and internal control systems concern RM & IC systems review The revised CG code highlights the board’s ongoing responsibility to oversee Process used to identify Statement that a review of significant risks effectiveness of RM & IC Disclosure systems has been conducted risk management and internal control requirements systems. The old version of Code Provision under the revised Main features of the RM & CG Code Adequacy & effectiveness C2.1 required that ‘directors of an issuer IC systems assessment on the IA function should at least annually conduct a review of the effectiveness of the issuer’s and its Board’s acknowledgement Matters were considered of responsibilities in the board’s review subsidiaries’ internal control systems and report to the shareholders’. Process used to review effectiveness & resolve Code Provision requirements material internal control defects Recommended Best Practices Amended code provision C2.1 puts forth new requirements that:
• the board should oversee the issuer’s risk management and internal DisclosureDisclosure ofof the the annual annual review review of ICof and the RM IC systemsand RM systems control systems on an ongoing basis, and 100
80 • the board should also ensure that a 57 53 60 review of the issuer’s and subsidiaries’ 60 75 80 69 risk management and internal control 86 systems has been conducted at least 40
annually, and report to shareholders 43 43 20 38 that it has done so in the corporate 28 23 12 18 governance report. 0 Overall HSI HSCEI Real estate Retail Technology Financial services Our study revealed that a majority of the companies (69%) were early adopters % of annual review of IC and RM systems % of annual review of IC system only for the disclosure of review for both
April 2017 18 Sponsor's Feature
One of the reasons that HSI constituents Disclosure of the existence of IA function Disclosure of the existence of an internal audit (IA) function perform better is because substantial emphasis and resources are put into 82 risk management and internal control 94 areas to respond to market expectations 78 Existence of and regulatory changes. The majority of 90 IA function HSI constituents have made an effort 73 to increase their voluntary disclosure 70 beyond the level of mere compliance. This 93 greater transparency and the additional Summary of the disclosure requirements under the revised CG code 20 information disclosed helps investors to 36 analyse the overall risk profiles of the Disclosure of 10 resources & 20 companies and facilitates more informed qualifications 10 investment decisions. of IA staff 20 20 2. Risk management system 0 20 40 60 80 100 The latest CG code puts a new emphasis % on risk management. Listed companies are required to develop processes to Overall Retail identify, evaluate and manage significant HSI Technology risks, and to determine the main features HSCEI Financial services of risk management (RM) and internal Real estate control (IC) systems. Some companies have already been using corporate governance reports as a public platform to detail what type of RM processes are observed in disclosure rates: financial issuers should have an IA function, currently in place; to provide a description services companies (63%) topped the list, and those who don’t should review of the key risks they face; and to include followed by real estate (58%), technology the need for it on an annual basis and mitigation measures they use to address (33%) and retail (13%) companies. disclose the reasons for its absence in these risks. Boards are also given an the corporate governance report. important responsibility – they are tasked 3. Internal audit function with overseeing management in the Another area of key changes in the CG 2. New Code Provision C.2.5 states design, implementation and monitoring of Code was to highlight the importance of that the IA function carries out the RM and IC systems, and ensure that the internal audit (IA) function. Previously, analysis and independent appraisal effective systems are established an IA function was a Recommended Best of the adequacy and effectiveness and maintained. Practice; this is now a Code Provision. of the risk management and internal As a result, companies are required to control systems. Our study found that 45% of the establish an IA function and to assess companies disclosed the process used to the effectiveness of the IA function on a 3. Amended Code Provision C.2.2. identify, evaluate and manage significant regular basis. states that the board’s annual review risks. Among indices, HSI companies should ensure the adequacy of were clearly ahead of the curve: 64% The three major revisions to the CG Code resources, staff qualifications and of HSI companies disclosed their risk for the IA function are summarised below. experience, training programmes and management practices, while only 23% budget of the issuer’s IA function of HSCEI companies did. From a sector 1. Upgraded from Recommended Best (in addition to its accounting and perspective, a greater variance was Practice C.2.6 to Code Provision C.2.5, financial reporting functions).
April 2017 19 Sponsor's Feature
form part of the board’s assessment of Disclosure of adoption of control self-assessment control effectiveness. Disclosure of adoption of control self-assessment
Our study found that 36% of the companies adopted CSA to assess their internal controls by management. There 48% 65% 28% was significant divergence across indices and sectors on using CSA. This was one of Overall HSI HSCEI Real estate the areas in the study where the adoption 36% rate among HSCEI companies (65%) surpassed that of HSI companies (48%). However, only 3% of the directors of 3% 10% 75% these HSCEI companies said they received management confirmation of their RM and Retail Technology Financial IC systems’ effectiveness. HSI companies services evidenced a much smaller disclosure gap between the number of companies adopting the CSA practice (48%) and Our study revealed that 82% of organisation. Regulations also require directors of those companies receiving companies disclosed that they had an IA that companies disclose in their CG management confirmation (32%). function in CG reports, with almost all reports that their RM and IC systems are HSI companies (94%) and 78% of HSCEI operating effectively. In this connection, 5. Other disclosures in CG reports companies making the disclosure. By management is expected to provide a PwC’s study found that 43% of companies sector, financial services (93%) and real ‘confirmation’ to the board on the RM and have disclosures related to handling estate (90%) companies had the highest IC systems’ effectiveness. inside information in their CG reports. The rates of disclosure. level of disclosure is higher among HSI For management to provide such companies (58%) than HSCEI companies A wider gap emerged among companies ‘confirmation’, many leading organisations (30%). From a sector perspective, that provide detail on the resources have implemented a control self- companies in real estate (63%) and and qualifications of IA staff. Only 20% assessment (CSA) framework. This allows financial services (55%) are early of analysed companies covered the IA management to verify that controls are adopters and have met inside information function in their annual review to assess working as expected. By linking key risks disclosure requirements. Disclosure was and ensure the adequacy of resources, to controls, management can carry out marginally lower among companies in qualifications and experience, training periodic testing to form an in-house retail and technology, at 23% each. programmes, and the budget of their assessment of their existing (‘as is’) controls IA function. While companies in the that address their key risks, identify The way forward HSI boasted a disclosure rate (36%) weaknesses in internal controls and As this study has shown, there have significantly higher than the average, both facilitate the formulation of action plans to been numerous changes to the CG code the HSCEI and retail sector were below the address any identified weaknesses. that require companies to adapt quickly. average at 10%. The study has also illustrated diverging A CSA programme also helps to reinforce patterns of adoption among companies in 4. Management confirmation to the control ownership and awareness to line different sectors, particularly in the area board on systems effectiveness managers. The CSA can be conducted of risk management practices. Companies Establishing and maintaining strong through a variety of different means, such may be at different stages of adoption risk management and internal controls as questionnaires or checklists. The process and need assistance in different areas. is critical for the success of any can be reviewed by internal auditors and Based on the findings of the study, we
April 2017 20 In Focus
have identified six key areas for the way forward, where companies may have questions or need further information to the study allows companies help assess their current progress. to think more deeply and
1. Perform a gap analysis against the creatively about compliance revised CG code with the Corporate • Benchmark current practices against the revised CG code Governance Code as requirements. a value-adding activity
• Identify the gap and work out a plan to remediate it.
2. Formalise and enhance your risk management system 4. Assess your internal audit function 6. Strengthen CG report disclosure • Enhance/set up a robust risk • Conduct a quality assessment review • Understand market expectations management system. to assess the adequacy and and best practices in corporate effectiveness of the IA function. governance disclosure. • Develop a proper risk management structure, policy and procedures. • Areas under review include, but are not • Determine corporate governance limited to: IA’s roles and responsibilities, report disclosure strategy in relation • Perform a risk assessment, and authority, structure, resources, staff to risk management and internal identify key risks faced by the qualifications and experience, training control. company, the risk owners and risk programmes and budget. mitigating actions. • Draft the disclosure and submit for • Report results to management and management and the board/audit • Report results to management and the board/audit committee; and agree committee review. the board/audit committee. and implement the action plan for IA function enhancement. At the end of the day, ‘cracking the 3. Develop a control self-assessment code’ is not a one-off effort. However, framework 5. Review compliance to Section C.2 of once a company has established robust • Develop a CSA mechanism (for the CG code systems and proper processes to deal example via the use of CSA • Establish a robust and comprehensive with changing regulations, many find questionnaire and/or on-site review mechanism to ensure that that being ahead of the curve affords visit) to facilitate management the company complies with Code them advantages that increase their assessment of internal controls at Provision C.2. competitiveness and improve relations the issuer and subsidiaries level. with investors. • Summarise the review results and • Summarise the results of CSA and report to the board on the Kanus Yue report to management and the effectiveness of the risk management Risk Assurance Partner, board/audit committee. and internal control systems. PwC Hong Kong
• Rectify any control gaps identified • Review listing rules compliance Copyright 2017 and enhance the internal control process, for example inside PricewaterhouseCoopers. system. information regulations. All rights reserved.
April 2017 21 Technical Update
New governance standards for authorised insurers Tow Lu Lim and Sara Or, partners of Mayer Brown JSM in Hong Kong, assess the implications of the new guidance note issued by the Office of the Commissioner of Insurance (OCI) imposing more stringent corporate governance standards on authorised insurers in Hong Kong.
April 2017 22 Technical Update
017 brings a new and modernised Further, the Revised GN10 provides Roles and responsibilities of the board 2set of corporate governance that more rigorous standards are now The roles and responsibilities of the board standards to authorised insurers in expected of individuals filling the role have been fleshed out in the Revised Hong Kong. The revised edition of of independent non-executive directors GN10. It specifies that the pivotal role of the Office of the Commissioner of (INEDs). Where previously only the insurer’s the board in setting the strategic plan and Insurance (OCI)’s Guidance Note on the controllers or associates of the insurer’s policy of the insurer requires the board to Corporate Governance of Authorised controller or director were considered take into account the long-term financial Insurers (Revised GN10), which sets out to be not sufficiently independent to soundness of the insurer, the legitimate the minimum standards of corporate become INEDs, directors or controllers of interests of its stakeholders and fair governance expected of authorised a corporation having significant financial treatment of policy holders. insurers, came into effect on 1 January interests with the insurer are now unlikely 2017, retiring the original guidance note. to meet the criteria under the Revised Furthermore, greater accountability is now GN10. Nor is an individual who has been expected of the board, which is tasked with Modelled upon the ‘insurance core an employee with the insurer within the the express responsibilities of managing principles’ of the International last three years likely to be accepted as risks appropriately and establish clear and Association of Insurance Supervisors, the an INED (whereas previously only current transparent internal policies. They include: Revised GN10 seeks to raise corporate employees were excluded). governance standards of insurers in • setting an appropriate risk appetite Hong Kong. It requires insurers to To maintain checks and balances against and strategy for the insurer more clearly define responsibilities the influence of management and within senior management and control controllers, the Revised GN10 also sets • providing appropriate risk functions, as well as the implementation out the requirement that a minimum of management and internal control of effective risk management and one-third of the board should be made up systems internal controls ensuring stronger of INEDs, up from the previous one-fifth checks and balances. ratio required. However, one INED would be • providing a reliable and transparent sufficient for small insurers with a smaller financial reporting system What’s New? board of less than five directors. The key changes introduced by the • establishing adequate policies and Revised GN10 are set out below. Other than expertise in finance and procedures for the appointment of investment, the Revised GN10 advises that external auditors, and The board and its composition the board be made up of a greater diversity The board must comprise a suitable of expertise, which may include areas such • promoting transparency on number of directors that enables it to as underwriting, claims and actuarial as well. governance overall with timely carry out its functions effectively and efficiently. The Revised GN10 provides Highlights that there should be a minimum of five directors (for small authorised insurers, the minimum number of directors should • the new guidance note issued by the insurance regulator became effective on be three). It is also mandated that the 1 January 2017, but many of the substantive new requirements will not take board should have sufficient knowledge effect until 1 January 2018 and relevant experience of insurance business to guide the authorised insurer • authorised insurers will need to review their existing policies and internal and oversee its activities effectively. As control systems in light of the new governance requirements such, the Revised GN10 provides that at • among other things, the new guidance note requires insurers to more clearly least one-third of the directors should define the responsibilities within senior management and control functions possess such knowledge and experience.
April 2017 23 Technical Update
with this raising of the bar for corporate governance standards, insurers will have to make governance a key priority
disclosure of accurate and useful GN10. Insurers may set up committees to be held by electronic means such as information to the public and within with combined functions, as long as it telephone or video conferencing. the company. does not compromise the integrity or effectiveness of the functions. Fiduciary and general duties of Committees individual directors While ultimate responsibility lies with the The remuneration committee should The Revised GN10 deems it important board as a whole, activities or tasks can include INEDs and should be chaired by for directors to avoid actual, potential be delegated to designated committees an INED; while the nomination committee and perceived conflicts of interest. If within the board, provided it is done in should be comprised of at least one INED. such conflict is inevitable, there should a clear and well-defined manner, with be clear and well-defined procedures in appropriate allocation of powers and An insurer that is part of a group of place to effectively manage them, through effective monitoring from the board. To companies may rely on group committees, for example disclosure to the board, avoid undue concentration of powers in including a group risk committee and a abstention and prior approval of the board a director, the Revised GN10 suggests group audit committee, so long as they or shareholders. rotation of membership. abide by the principles set out in the Revised GN10 and take into account of Specific provisions on the fiduciary duties The Revised GN10 requires that, save the insurer’s matters. and general duties of care and skill each for small insurers, a risk committee be individual director owes to the insurer set up in addition to the mandatory Board meetings have been set out to include: audit committee and any other optional The Revised GN10 confirms that the specialised committees that are minimum of four board meetings • to act in good faith, honestly and established to assist in its work. Guidance expected to be held annually, as set reasonably on how each optional committee, out in the old GN10, should be held at including committees for investment, approximately quarterly intervals. Each • to exercise due care and diligence nomination, remuneration, underwriting, director should attend at least two of claims settlement, and reinsurance, should these meetings. Where required, the • to act in the best interests of both operate is also set out in the Revised Revised GN10 allows board meetings the insurer and policy holders
April 2017 24 Technical Update
• to exercise independent judgement concept of ‘key persons in control For INEDs in particular, remuneration and maintain objectivity in the functions’, who are defined by the should be set at a level that does not decision making and Insurance Companies (Amendment) compromise their independence. Ordinance (Amendment Ordinance) • to refrain from using his or her and the Revised GN10, as individuals Best practices for remuneration, including position to gain undue personal responsible for control functions, namely setting up a remuneration structure advantage or causing any detriment in the areas of actuarial, financial comprising of both fixed and variable to the insurer. control, internal audit, compliance, components, measuring performance risk management and intermediary and making severance payments, are Directors, particularly those with other management (and other functions the also detailed. directorships, are expected to dedicate Financial Secretary specifies by notice). sufficient time and attention in carrying Appointment of such key persons are Evaluation of the board and board out their duties, including attending board mandated by the Amendment Ordinance committees meetings. to require approval by the Independent Directors are expected to review the Insurance Authority, the insurance performance of the board at least once Senior management industry regulator, which is set to replace a year to address any inadequacies and The Revised GN 10 sets out a new section the OCI this year. implement appropriate measures for of provisions regarding senior management improvement. They should also review its which includes the chief executive. Strengthening of risk management and committees annually to ensure that the the internal control systems of insurers is delegated responsibilities are being carried Senior management is to be held a core area of amendment in the Revised out effectively. accountable for the carrying out of GN10, and control functions play a big the insurer’s day-to-day operations role in providing additional checks and Servicing of customers and implementation of systems and balances and supporting the board with The Revised GN10 highlights fair controls in accordance with the business its oversight duties. Appropriate authority treatment of customers as an important strategies, policies and procedures set out and independence are therefore to be concept to incorporate into the insurer’s by the board. given to each control function, with business culture, strategies and internal adequate reporting lines to the board controls, and for which the board is Individuals appointed to senior set up appropriately to prevent conflict ultimately responsible. It provides more management should be authorised by the of interests. elaborate guidance on providing policy board, with their roles and responsibilities information to customers and handling clearly defined and formally documented. Remuneration their complaints. An appropriate reporting line between The Revised GN10 introduces a new senior management and the board should section of provisions requiring a prudent Other changes also be established, with adequate control and effective written remuneration policy The Revised GN10 also incorporates new systems in place to allow the board to to be established for not only general sections on the issues set out below. assess their performance against the directors and senior management, objectives set out. but also INEDs, key persons in control • Proper books and records – functions and employees authorised insurers should properly record The two roles of chief executive and the to make decisions on material risks all of their transactions such that chairman would not be assumed by the (such as those authorised to decide on they can be sufficiently exhibited same person, and an appointed actuary underwriting or investment activities). and explained to the insurance cannot assume either role. The policy should not induce them to regulator, and implement adequate take inappropriate or excessive risks and documentation to demonstrate Key persons in control functions should demonstrate a clear relationship compliance of regulations and The Revised GN10 also introduces the between performance and remuneration. guidelines.
April 2017 25 Technical Update
• Cybersecurity – insurers should put in place policies and procedures to defend themselves against cyber while there will be security threats, including designing response plans and mitigation some pain for insurers, measures should there be a breach. the introduction of
• Business continuity planning – Revised GN10 is a step insurers are required to plan against in the right direction plausible disruptions to their businesses by taking precautionary measures or designing and maintaining business continuity plans (BCPs) that allow them to continue and restore business activities when disruptive events take place. If an insurer needs to activate its BCP, it must notify the regulator promptly with detailed information of the identified disruptions, actions taken, potential impacts and the recovery target timeline, and is expected to continue submitting progress reports until business resumes to normal. governance standards, insurers will have internationally and it clearly sets out to make governance a key priority. The what exactly is expected of insurers doing Certain provisions to take effect at a crux of the changes in the Revised GN10 business in Hong Kong. The increased later date requires new systems and policies to be regulatory requirements on insurers is To allow time for transition, the more established and existing ones to be closely similar to what the banking industry is substantive changes requiring a reviewed to ascertain if they meet the experiencing and there is more change on minimum number of INED on the board, more stringent criteria. the horizon for insurers in Hong Kong. establishment of a risk committee, as well as requirements on remuneration matters The legal and compliance divisions of Interestingly, the Revised GN10 also seeks will not take effect until 1 January 2018. insurers are likely to be heavily involved to introduce the concept of fair treatment in designing and implementing their of customers into the insurer’s business Insurers are also given more time to business strategies and operations. philosophy. This gives rise to questions establish clear and adequate policies As such, the changes will increase the whether insurers should reconsider the concerning key persons in control compliance burden for insurers in Hong application of stringent policy terms and functions, as the requirements of the Kong and this will result in recruitment conditions (for example, breach of warranty Revised GN10 will only take place of more resources and engagement of and conditions precedent to liability when Section 13AE of the Amendment external service providers. clauses) that exists in certain policies. Ordinance comes into operation upon further notice from the Financial Services While there will be some pain for insurers, Tow Lu Lim and Sara Or and the Treasury Bureau. the introduction of Revised GN10 is a step Partners of Mayer Brown JSM in the right direction. It will bring Hong Takeaway Kong in line with standards of corporate Copyright 2016. The Mayer Brown With this raising of the bar for corporate governance already expected of insurers Practices. All rights reserved.
April 2017 26 In Focus
HKICS ACRU 2017 Annual Corporate and Regulatory Update
Date: Friday, 2 June 2017 Time: 8.45am - 6.20pm Venue: Hall 5G, Hong Kong Convention and Exhibition Centre, Wan Chai, Hong Kong
Co-sponsors & speakers (in alphabetical order): REGISTER Companies Registry NOW! Hong Kong Exchanges and Clearing Limited Hong Kong Monetary Authority Office of the Privacy Commissioner for Personal Data Securities and Futures Commission
C100 M60 Y10 K53 Co-Sponsors Plantinum Sponsor Gold Sponsor C0 M94 Y64 K0
Silver Sponsors
Please visit the HKICS website for details: www.hkics.org.hk/ACRU2017. For enquiries, call 2830 6011 or 2830 6069 or email to [email protected]. April 2017 27
The Hong Kong Institute of Chartered Secretaries 香港特許秘書公會 (Incorporated in Hong Kong with limited liability by guarantee)
ACRU-flyer2017_full_4.indd 1 5/4/17 1:16 pm Technical Update
Price-sensitive information and the Market Misconduct Tribunal A primer for listed companies and their directors
April 2017 28 Technical Update
The Securities and Futures Commission (SFC) has prioritised listed company malfeasance for enforcement action. As a result, listed companies and their directors will come under increasing scrutiny as to how they manage price-sensitive information. Timothy Loh, Managing Partner, Timothy Loh LLP, provides guidance to listed companies and their directors on how to respond if the SFC targets them for enforcement action.
om Atkinson, the new Executive and may be banned from trading in the to assist in the investigation, as well as TDirector of the SFC responsible for the market, for up to five years. A director persons who are under investigation. Enforcement Division, recently confirmed may also face monetary penalties that listed company malfeasance, including orders to account for any profit The SFC’s powers of investigation are including insider dealing and market gained or loss avoided, to pay a regulatory draconian. The SFC may require a person abuse, is at the top of the Enforcement fine, or to pay the government and the to answer a question even if the answer Division’s priority list. The confirmation SFC any costs reasonably incurred by may tend to self-incriminate. Whilst an is consistent with the empirical evidence them as a result of the misconduct. The answer cannot, if an appropriate claim – the SFC is increasingly taking action costs can be relatively high, with figures is made, generally be used in criminal against listed companies and their in the HK$3 million to HK$7 million range proceedings against the person, MMT directors on the basis that they have not being unusual. proceedings are not criminal. As a failed to disclose non-public, price- result, a person may be required to give sensitive information in a timely or Directors and officers liability insurance evidence which would tend to establish accurate manner or traded whilst in may not provide adequate coverage. his own liability in any subsequent MMT possession of such information. Though not yet settled, even where policy proceedings. language covers regulatory fines, case law In some cases, this enforcement action suggests that even a finding of a negligent Significance of the investigation stage may result in proceedings before the breach of regulatory requirements may be The investigation stage is arguably the Market Misconduct Tribunal (MMT). MMT sufficient to bar indemnity. most critical stage of the enforcement proceedings can result in significant process. It is at this stage that the SFC reputational damage and financial liability, Investigation will decide whether or not to prosecute. both for the directors and the listed Proceedings before the MMT are invariably Thus, whilst some lawyers prefer to companies concerned. A finding of liability foreshadowed by an SFC investigation. advise clients to remain as tight-lipped by the MMT can trigger further action The investigation typically includes a as possible and to wait for their day in by the SFC to compensate investors and demand for production of documents and court, we often advise clients to present can form the basis of statutory actions interviews with persons who may be able their story as forcefully as possible at by investors to recover losses, with the finding of the MMT being admissible as Highlights proof of wrongdoing. In the case of Tiger Asia, the SFC sought compensation orders of over HK$45 million from the hedge • Market Misconduct Tribunal (MMT) proceedings can result in significant fund and its officers. Similarly, in the Du reputational damage and financial liability Jun and Tsoi Bun cases, the SFC sought compensation orders of over HK$23 • a director found liable by the MMT may be disqualified from serving as a million and HK$13 million respectively. director and may be banned from trading in the market for up to five years • directors may also face significant monetary penalties, and directors and A director found liable by the MMT may officers liability insurance may not provide coverage be disqualified from serving as a director,
April 2017 29 Technical Update
this stage. The story should emphasise Prosecution and other options • a disgorgement order, meaning that the legal and human elements which Following at least an initial investigation, the company or a director must pay would most persuasively argue against the SFC may decide to prosecute or take an amount not exceeding the amount prosecution and should, naturally, remedial action or both. Prosecution of profit gained or loss avoided as a reflect conduct consistent with the options vary depending on the type of result of the market misconduct. regulatory framework. alleged misconduct. MMT proceedings differ from criminal At the same time, the investigation stage Market manipulation and insider dealing proceedings in two significant ways. First, lays down the evidential foundation If the way that price-sensitive information criminal proceedings may result in jail for any subsequent MMT or other was handled is classified as market time whereas MMT proceedings cannot. proceedings. Any future statement in such manipulation or insider dealing and the SFC Jail time in criminal proceedings for an proceedings will be measured against any chooses to prosecute, it can generally do so offence committed by a director or a listed statement or other evidence tendered by initiating either criminal proceedings or company of which he or she is a director can earlier during the investigation stage. An proceedings before the MMT. be as high as 10 years. Secondly, the rules inconsistent story may damage credibility. of evidence and the standard of proof are Proceedings before the MMT are higher in criminal proceedings compared Legal professional privilege civil rather than criminal in nature. to MMT proceedings. For example, in a If legal advice has been obtained in Nevertheless, in addition to reputational criminal proceeding, the prosecution must relation to the handling of price-sensitive consequences, such proceedings can prove its case beyond reasonable doubt. In information which has become the subject result in a range of penalties including: contrast, in an MMT proceeding, liability will of an investigation, companies will need be established if it is simply more probable to consider at the investigation stage • a disqualification order, meaning than not that the specified person engaged whether or not they can and should insist for a director that he or she will be in market misconduct (that is on a civil upon legal professional privilege to shield disqualified from being a director for standard of proof). such advice from production. Producing a period of up to five years such advice may help to characterise the As a general principle, a person cannot be company as being cooperative and may • a cold shoulder order, meaning subjected to both criminal proceedings and lay the groundwork for an argument of that the company or a director will MMT proceedings for the same conduct in the reasonableness of the conduct of be prohibited from dealing in any reliance of the market misconduct provisions the company and its directors. If this securities for a period of up to five of the Securities and Futures Ordinance approach is taken, the company will need years (SFO) governing insider dealing and market to further consider the risk of loss of manipulation. In other words, the initiation confidentiality over all the legal advice • a cease and desist order, meaning of criminal proceedings for particular given, even if only some of the advice that the company or a director will conduct will preclude MMT proceedings for is disclosed. Refusing to produce such be prohibited from perpetrating the the same conduct. Conversely, the institution advice may frustrate the ability to tell conduct that constitutes market of MMT proceedings for particular conduct the story and hence, justify conduct. In misconduct and may commit a will preclude criminal proceedings for the the case of a director, the consequence criminal offence if the company or same conduct. of such frustration however, may be to the director is found by the MMT in lay the groundwork for a defence by the future to have failed to comply This is not to say that there is no risk of the director that he does not have a with this prohibition prosecution both through criminal and reasonable opportunity to be heard. In this MMT proceedings. For example, although regard, as a matter of natural justice, the • a cost order, meaning that the there is no precedent, there is a theoretical MMT has no jurisdiction to make a finding company must pay the costs incurred possibility that insider dealing may against a director who has not had such by the government or the SFC in be prosecuted both through the MMT an opportunity to be heard. pursuing the market misconduct, and under the market misconduct provisions
April 2017 30 Technical Update
typically academics in finance or business studies or members of the finance industry. Their presence is intended to provide greater market expertise to the tribunal. in an MMT proceeding, liability will be In theory, the MMT is an inquisitorial established if it is simply more probable than tribunal, meaning that its function is to not that the specified person engaged in market investigate and report on what happened. In practice, the MMT assumes a role similar misconduct (that is on a civil standard of proof) to a court in an adversarial proceeding, with the defendants, called specified persons, squaring off against a prosecutor, called the presenting officer, appointed by the SFC. The specified persons will normally be represented by both their solicitors and governing insider dealing and through the as orders to pay the SFC’s costs in the counsel. The presenting officer will typically criminal courts relying on the anti-fraud investigation and proceedings. be a senior member of the bar instructed by provisions of the SFO as these anti- the SFC’s legal department. fraud provisions are not per se market Remedial action misconduct provisions. Separate from prosecution, the SFC may Proceedings before the MMT are generally seek remedial action even before any open to the public. This means, for Non-disclosure of inside information liability has been established by the MMT example, that journalists can attend MMT The failure to disclose non-public price- or a criminal court. For example, the SFC hearings and report on the proceedings as sensitive information in a timely or can apply to court to freeze the assets in they unfold. In the past, the news media accurate manner may result in a breach of Hong Kong of suspected wrongdoers with has given substantial profile to certain the requirement for a listed company and the idea that the frozen assets may later be cases. Accordingly, a listed company and its directors to disclose inside information. applied to compensate investors for losses its directors who are subjected to MMT If the failure is so classified (as opposed to arising from the misconduct. proceedings may be exposed to risk of being classified as market manipulation), reputational damage even before the MMT it may be prosecuted only through MMT Such remedial action is sought before a makes any adverse finding or determination. proceedings. There are no statutory judge in the High Court of Hong Kong provisions establishing criminal offences rather than through the MMT. Remedial Timothy Loh for this type of breach. court orders can result in financial Managing Partner, Timothy Loh LLP consequences that may well exceed the MMT proceedings for this type of breach maximum fine that could be ordered by The author gratefully acknowledges may result in a fine of up to HK$8 million the MMT itself. This is because the loss to the assistance of Francis Comtois, (but not an order for disgorgement). At the investors arising from the mishandling of a Partner at Timothy Loh LLP, same time, on a finding of a breach, the price-sensitive information can run very and Gigi Ma, a trainee solicitor at MMT may order that the listed company high and there is no statutory limit on the Timothy Loh LLP. This article is not appoint an independent professional amount of compensation the court may and should not be relied upon as adviser to advise on compliance or order to be paid for such loss. legal advice. Timothy Loh LLP and that the directors undergo compliance its partners disclaim any liability training. As with market manipulation Market Misconduct Tribunal to any person so relying upon this and insider dealing, directors may face a The MMT is an administrative body akin to article as such. disqualification order, a cease and desist a court. It is chaired by a judge and assisted order and a cold shoulder order as well by two lay members. The lay members are Copyright: Timothy Loh LLP
April 2017 31 Institute News
Professional Development
Seminars: February to March 2017
10 February 24 February China’s new The Hong Kong Code on cybersecurity law Takeovers and Mergers
Chair: Richard Leung FCIS FCS, Institute Past President, and Chair: Jenny Choi FCIS FCS(PE), Institute Professional Services Barrister-at-Law, Des Voeux Chambers Panel Member, and Senior Manager, Global Compliance Speakers: Gabriela Kennedy, Partner, Head of Asia IP & TMT Group; & Reporting – Corporate Secretarial Services, Ernst & and Xiaoyan Zhang, Counsel (New York, USA); Mayer Young Company Secretarial Services Ltd Brown JSM Speaker: Anthony Wan, Partner, King & Wood Mallesons
16 February 27 February Anti-money laundering: Trusts for family and essential training for corporate planning (re-run) service providers
Chair: Alberta Sie FCIS FCS(PE), Institute Professional Services Chair: Terry Wan FCIS FCS(PE), Institute Membership Committee Panel Member, and Company Secretary & Director, Reanda Member, and Group Company Secretary, Li & Fung Ltd EFA Secretarial Ltd Speaker: Katherine Chiu FCIS FCS, Director, Sino Corporate Speakers: Vincent To, Senior Partner; But Sun Wai, Partner, Criminal Services Ltd and Civil Litigation; and Ronald To, Senior Associate, Litigation & Dispute Resolution; W K To & Co
22 February 1 March Tax considerations when Insights drawn from recently undertaking a group suspended Hong Kong listed reorganisation in Hong Kong companies – from a financial (re-run) investigation perspective
Chair: Jenny Choi FCIS FCS(PE), Institute Professional Services Chair: Mohan Datwani FCIS FCS(PE) CAMS, Solicitor, Institute Panel Member, and Senior Manager, Global Compliance Senior Director and Head of Technical & Research & Reporting – Corporate Secretarial Services, Ernst & Speaker: Barry Tong, Partner, Advisory Services, Grant Thornton Young Company Secretarial Services Ltd Hong Kong Ltd Speakers: Gwenda Ho, Partner, Tax Services; Bruce Lee, Director, Global Mobility Services; Yan Yeung, Senior Manager, Tax Services; and Kevin Chiu, Senior Manager, Tax Services; PricewaterhouseCoopers Hong Kong
April 2017 32 Institute News
2 March Online CPD (e-CPD) seminars Beyond reporting: practical The Institute has launched a series of e-CPD seminars in guide on effective ESG collaboration with The Open University of Hong Kong (OUHK). governance and risk Through the online learning platform of OUHK, members, management graduates and students are able to easily access selected video- recorded seminars with any smart devices anytime, anywhere. Chair: Eric Chan FCIS FCS(PE), Chief Consultant, Reachtop The launch of e-CPD seminars enables members, graduates and Consulting Ltd students to schedule their professional learning more flexibly. Speaker: Brian Ho, China Sustainability Leader, Climate Change and Sustainability Services, EY Details and registration are available at the CPD courses section of the OUHK website: http://ecentre.ouhk.edu.hk. For enquiries, please contact the Institute’s Professional Development section at: 2830 6011, or email: [email protected].
3 March Company secretarial practical training series: non-Hong Seminar fee discount for HKICS Kong companies under the registered students new Companies Ordinance Effective from 1 January 2017, registered students of the Institute (re-run) can enjoy a 30% discount for the Institute’s regular ECPD seminars. Chair: Jenny Choi FCIS FCS(PE), Institute Professional Services Panel Member, and Senior Manager, Global Compliance & Seminar Regular Discounted rate for Reporting – Corporate Secretarial Services, Ernst & Young duration seminar rate registered students Company Secretarial Services Ltd 1.5 hours HK$320 HK$230 Speaker: Ella Wong ACIS ACS(PE), Senior Manager, Corporate Services, Tricor Services Ltd 2 hours HK$400 HK$280
2.5 hours HK$480 HK$340 15 March From approval to filing: a new era for China’s foreign investment laws
Chair: Richar d Law FCIS FCS, Institute Education Committee Member, and Company Secretary, Global Brands Group Holding Ltd Speaker: Alan Xu, Partner, Zhong Lun Law Firm
April 2017 33 Institute News
Professional Development (continued)
Key update on the revised MCPD policy
Revised MCPD Policy (effective from 2016/2017 CPD year) Extended coverage a. participation in Institute activities as a mentor/coach for the Institute or other professional associations of CPD activities or institutions b. being an external examiner/assessor for the Institute or other professional associations or institutions for the promotion of education or professionalism in the key areas of learning c. participation in committees of the Institute other than technical committees of the Institute or committees of other professional associations or institutions for the promotion of education or professionalism in the key areas of learning A maximum of five CPD points in each CPD year can be earned in each category under (a)-(c), excluding activities of members/graduates’ own occupation. Full exemption Full exemption from the MCPD requirements would be granted for the following reasons: from MCPD • long-term illness compliance • pregnancy • period of unemployment for over six months, or • retirement. Applications, with proof, should be submitted to the Institute by 31 July each year.
MCPD requirements Members are reminded to observe the MCPD deadlines set out below. Failing to comply with the MCPD requirements may constitute grounds for disciplinary action by the Institute’s Disciplinary Tribunal as specified in Article 27 of the Institute’s Articles of Association. Graduates who acquired graduate status before 1 August 2016 are required to comply with the Institute’s MCPD requirements.
CPD year Members who qualified between MCPD or ECPD Point accumulation Declaration points required deadline deadline
2016/2017 1 January 1995 - 31 July 2016 13.5* (at least 2.5 ECPD points) 30 June 2017 31 July 2017
2017/2018 On or before 30 June 2017 15 (at least 3 ECPD points) 30 June 2018 31 July 2018
*pro-rata for 2016/2017 as a result of the Institute’s year-end date change.
April 2017 34 Institute News
ECPD forthcoming seminars
Date Time Topic ECPD points 24 April 2017 6.45pm – 8.15pm 中國公司法和證券法實務 1.5 26 April 2017 6.45pm – 8.45pm Opportunities and challenges for China outbound investment 2 8 May 2017 6.45pm – 8.15pm Challenges of shareholder activism and disputes 1.5 11 May 2017 4.00pm – 5.30pm Internal audit – expect more 1.5 15 May 2017 6.45pm – 8.15pm 2017 ESG reporting: KPI disclosure 1.5 17 May 2017 4.30pm – 6.00pm Cybersecurity: solutions for the digital age 1.5 19 May 2017 6.45pm – 8.15pm Company secretarial practical training series: steps to effective board 1.5 evaluations
For details of forthcoming seminars, please visit the ECPD section of the Institute’s website: www.hkics.org.hk.
Membership
CSj goes green New graduates The Council, in support of preserving the Congratulations to our new graduates listed below. environment, has offered HKICS members, graduates and students the option to receive CSj Chan Kam Yin Lee Lap To, Aric Tang Pui Yan electronically and from the Institute’s website: www.hkics.org.hk from August 2015 onwards. Chan Shun Cheong Leung Hau Yan, Wendy To Wing Tung The Institute is pleased to let you know that Chan Siu Tak Leung Wai Han Tsang Wing Sze 1,362 members, graduates and students have Chan Wai Chun Li Kin Tung Tse Chi Cheung opted for the electronic version (eCSj) as of 30 Chan Wan Yee Li Sin Ching Wong Chi Kwong June 2016. Chau Yuet Man Liu Pui Ching Wong Fung Ki Cheng Shing Yan Lo Chu Wing Wong Kit Yan If you are currently receiving the print copy Cheng Tsz Mei Lo Wing Han Wong Ting Yan but would like to switch to the eCSj, or if you Cheung Sin Kei Ma Yim Hung Wong Yan are currently receiving eCSj but would like to Chung Fung Ha Mok Pui Man Wong Yik Ka switch to the print copy, please complete and Feng Meijuan Ng Pui Yan, Carman Woo Man Yi return the reply form to the Secretariat on or Ho Mei Yi Ngai Fong Hung Wu Chun Pong before 31 May 2017. The change will take effect Kwok Suk Han Pang Hing Ting, Stella Yip Shui Man from 1 July 2017. If the Institute does not hear alternative instructions from those who opted Lau Kai Fan, Leonard Pui Joanne Yu Wan Chi for eCSj in 2016, we will continue to forward the Lau Kin Tat, Terry Qiu Minghao Yuen Hiu Fung eCSj to you in the 2017/2018 financial year. Lau Wing Man So Suk Ying Yung Yuen Ting Law Wai Yi Suen Mei Kwan You may change your means of receiving CSj Lee Hoi Lam Sum Suet Yi once a year from 1 April to 31 May.
April 2017 35 Institute News
Membership (continued)
Application for concessionary subscription rate • have encountered circumstances which, in the judgement of for 2017/2018 the Membership Committee, warrant the reduced rate. As a professional body established by members and for members, the Institute continues to offer concessionary subscription rates 3. Hardship rate to members who satisfy the criteria listed below. This applies to members who have ceased to receive income and/ or remuneration due to health conditions for over two years prior 1. Retired rate to application or other circumstances which, in the judgement of This applies to members who: the Membership Committee, warrant the hardship rate.
• are retirees and are not contributing to the Mandatory Notes to applicants: Provident Fund Scheme; and • The application deadline for any concessionary oo have reached the age of 55 before the beginning of the subscription rates for the 2017/2018 financial year is financial year (1 July 2017) and who have been a paid- Monday 31 July 2017. up member of the Institute for at least 25 years, or • All applications must be approved by the Membership oo retirees who have reached the age of 60 before the Committee, the decision of which is final. beginning of the financial year (1 July 2017) may be exempted from the 25-year membership requirement at • Retired rate applications should only be made once. the discretion of the Membership Committee. However, such members should keep the Institute informed immediately of any change in circumstances which may 2. Reduced rate affect their entitlement to the retired rate. This applies to members who: • Reduced rate and hardship rate applications are approved on • have been unemployed for a minimum of six months prior to an annual basis. their application; or The application forms for the concessionary subscription • have ceased to receive income and/or remuneration due to rates can be downloaded from the Membership section of the health conditions for a minimum of three months prior to Institute’s website: www.hkics.org.hk. For enquiries, please contact their application; or Rose Yeung at: 2830 6051, or Vicky Lui at: 2830 6088, or email: [email protected].
Forthcoming membership activities
Date Time Event
22 April 2017 9.00am – 2.30pm Community Service – beach cleaning on Earth Day
For details of forthcoming membership activities, please visit the Events section of the Institute’s website: www.hkics.org.hk.
April 2017 36 Institute News
Members’ activities highlights: February - March 2017
22 February 14 March Employer Networking skills reachout – training: how to Vistra Corporate break the ice Services (HK) Ltd
At Vistra Dr Eva Chan FCIS FCS(PE), Membership Committee Chairman, presenting a souvenir to Mary Cheung, well-known host and 4 March trainer HKICS dragon boat team – first training session at Tuen Mun River
HKICS paddlers showing great team spirit Trainer sharing practical techniques on establishing relationships with others
Advocacy
HKCPS luncheon talk with the Financial Secretary On 8 March 2017, a luncheon talk themed ‘To spend or not to spend?’ was organised by the Hong Kong Coalition of Professional Services (HKCPS) with Chan Mo-Po, Paul FCIS FCS GBS MH JP, the Financial Secretary of the Government of the HKSAR, as the Guest of Honour. The Institute has been a member of the HKCPS since 2011. Institute Treasurer Dr Eva Chan FCIS FCS(PE); Council members David Fu FCIS FCS(PE); Ernest Lee FCIS FCS(PE); and Bernard Wu FCIS FCS; Past Chairman Duffy Wong FCIS FCS; Past Presidents April Chan FCIS FCS; Rebecca Chow FCIS FCS; and Dr Maurice Ngai FCIS FCS(PE); Chief Executive Samantha Suen FCIS FCS(PE); and other Institute members and secretariat attended the event. Institute representatives with the Financial Secretary
April 2017 37 Institute News
Advocacy (continued)
External appointment Corporate Governance Roundtable Institute President Ivan Tam FCIS FCS On 13 March 2017, Institute President Ivan Tam FCIS FCS and Past President Natalia Seng has been appointed as the International FCIS FCS(PE) presented at the Corporate Governance Roundtable organised by the Hong Consultant of the ‘Thousand Talent Kong Companies Registry. The Institute is a supporting organisation of the event. Insights Programme of China Insurance Industry’ on effective board leadership, the Panama Papers and corporate transparency were (Thousand Talent Programme) for the year discussed during interactive sessions with the participants for promoting and enhancing 2017. The Thousand Talent Programme, good governance in the management of companies. launched in 2014 by the Insurance Association of China, aims to build up a top talent pool and to promote the continuous healthy development of the insurance industry in Mainland China. As the International Consultant, Mr Tam is responsible for contributing constructive opinions to ensure the smooth operation of the Programme.
International Women’s Day 2017 On 8 March 2017, Institute President Ivan Tam FCIS FCS and Vice-President Paul Stafford FCIS FCS(PE) attended a cocktail reception organised by the Women’s Commission of the Government of the HKSAR in celebration of the International Women’s Day 2017. Ada Chung JP, Registrar of Companies, presenting a souvenir to Ivan Tam
HKICS supports public governance initiative The Institute, being a partner organisation of the ‘NGOs Governance Platform’ project of The Hong Kong Council of Social Service (HKCSS), was invited to speak to the NGO board members and senior management on the compliance with the Companies Ordinance (Cap 622) (CO). On 17 March 2017, Institute Professional Development Committee Member Susan Lo FCIS FCS(PE) represented the Institute to speak at the forum. The enthusiastic participants were highly At the seminar HKCSS representative presenting a active in seeking professional advice during the souvenir to Susan Lo Q&A session. Most enquiries were focused on NGO compliance obligations under the CO.
April 2017 38 Institute News
ICSA Council Meeting in Johannesburg, South Africa The Institute of Chartered Secretaries and Administrators (ICSA) held its Council Meeting on 17 and 18 March 2017 at the offices of Chartered Secretaries Southern Africa (CSSA) in Johannesburg, South Africa. Institute Past President and ICSA Senior Vice- President, Edith Shih FCS FCIS(PE), and Institute Chief Executive, Samantha Suen FCS FCIS(PE), attended the meeting.
As mentioned in the report of the Council of ICSA dated 16 August 2016, the Council of ICSA has been evaluating a number of strategic changes to ensure that ICSA can be a healthy, growing and sustainable professional institute into the future. At the At the ICSA Council Meeting March meeting, the ICSA Council concluded the review of the International Qualifying Scheme which resulted in a decision to expand the scheme into two streams – Chartered Secretaries and Chartered Governance Professionals – and to introduce a new entry-level category of membership to attract younger and aspiring professionals to be called Affiliated Members. ICSA and its divisions will communicate information relating to these strategic changes with its members and stakeholders regularly in the coming months and ICSA will seek member approval of these changes at its upcoming Annual General Meeting.
On 18 March 2017, ICSA President David Venus FCS presented an honorary fellowship to Professor Mervyn King of South Africa to recognise his immense contribution to corporate governance.
CSSA International perspectives on corporate governance seminar On 16 March 2017, Chartered Secretaries Southern Africa (CSSA) organised a seminar themed ‘International perspectives on corporate governance’ at the Killarney Country Club, South Africa, for over 100 Chartered Secretaries and governance professionals locally and around the world. ICSA President, David Venus FCS, and Alwyn Fouchee, Head: Regulatory Compliance, Issuer ICSA Council members, Divisional Chief Executives and Professor Regulation Division, Johannesburg Stock Exchange Ltd, were the Mervyn King keynote speakers. Institute Past President and ICSA Senior Vice- President, Edith Shih FCS FCIS(PE) participated in the discussions as a panellist sharing insights on ethics, corruption, culture, diversity, board composition and remuneration.
April 2017 39 Institute News
Advocacy (continued)
CSIA Council Meetings in Johannesburg, South Africa The Corporate Secretaries International Association (CSIA) held its Council Meetings on 15 and 16 March 2017 at the offices of Chartered Secretaries Southern Africa (CSSA) in Johannesburg, South Africa. Institute Chief Executive Samantha Suen attended. Due to strategic reasons, CSIA will be ‘re-domiciled’ from Geneva, Switzerland, to Hong Kong in 2017. Honorary Officers of the newly incorporated Hong Kong company ‘Corporate Secretaries International Association Ltd’ have been elected as follows:
President – Grace Tan (Singapore)
Vice-President – Chua Siew Chuan (Malaysia) At the CSIA Council Meeting Honorary Treasurer – Alan Evens (Australia)
Honorary Secretary – Dr Shyam Agrawal (India)
HKICS conference with HKICPA and the Law Society of Hong Kong on money laundering – now and the good old days The Institute, in collaboration with the Hong Kong Institute of Certified Public Accountants and the Law Society of Hong Kong, organised an anti-money laundering (AML) conference on 18 March 2017. The conference attracted over 120 participants from the industry and was moderated by Professor CK Low FCIS FCS, Associate Professor in Corporate Law, CUHK Business School, The Chinese University of Hong Kong. It featured an impressive line-up of expert speakers in the field of AML compliance, with top legal eagles and a past convicted money launderer sharing their different perspectives on the topic. Speakers and the moderator of the joint conference
April 2017 40 Institute News
Paul Moyes giving his opening remarks Ian Robinson sharing his expertise on AML
The first speaker, Mohan Datwani FCIS FCS(PE), HKICS Senior the defence in such trials, partly due to the shifting of the onus Director and Head of Technical & Research, looked at the of proof away from the prosecution, but also due to the fact long history of money laundering – from ancient times when that most of the successful prosecutions to date have been individuals needed to hide their wealth from rulers, to the heard in the lower courts where defendants did not have the emergence of the first global frameworks in the 1970s and right to a jury trial. He suggested that, while the judges of the 1980s designed to crack down on the laundering of the lower courts in Hong Kong are well-intentioned and diligent proceeds of drug trafficking. defenders of justice, their career path means that they often have no experience of the defence side of criminal proceedings. He was followed onto the podium by Will Giles, Partner of Hart Their experience is usually as a prosecutor for the Department of Giles, Solicitors & Notaries, who discussed some of the lessons Justice before they decide to become a magistrate. This, he said, he believes need to be learned from the conviction of Hong explains why the conviction rate in the lower courts in Hong Kong businessman Carson Yeung in March 2014 for money Kong is so high. laundering. Mr Giles suggested that Hong Kong is at variance with the rest of the common law world in shifting the onus Other speakers at the conference included Bruce Aitken, author of proof away from the prosecution. The prosecution, he said, of The Cleaner, who shared his experience as a past convicted did not have to prove that the monies in question were the money launderer; Kyran McCarthy, Partner, Forensic/Hong Kong proceeds of crime. Mr Yeung is currently serving a six years’ jail & Asia-Pacific Head of AML & Sanctions Services, KPMG China; sentence following his conviction. and Ian Robinson, Director, Robinson Management Ltd, who shared his experience in the long running trial of the Carrian The next speaker, Kevin Egan, Barrister, Baskerville Chambers, Group in the 1980s in Hong Kong. shared his experience of defending clients in Hong Kong money laundering cases, and painted a similarly bleak picture of the The Institute would like to thank KPMG China for sponsoring the chances of success. He suggested that the dice is loaded against venue and the lunch for the conference.
April 2017 41 Student News
International Qualifying Scheme (IQS) examinations
June 2017 diet schedule
Tuesday Wednesday Thursday Friday 6 June 2017 7 June 2017 8 June 2017 9 June 2017 Hong Kong Financial Hong Kong Strategic and Operations Corporate Financial 9.30am – 12.30pm Accounting Corporate Law Management Management
2.00pm – 5.00pm Hong Kong Taxation Corporate Governance Corporate Administration Corporate Secretaryship
Please enrol between 1 and 31 March 2017.
IQS study packs go green the PrimeLaw account, please contact Wolter Kluwer’s customer The Institute launched an online version of four IQS study packs service: [email protected] on 9 January 2017. This new service, which is free to all registered students, is to enable students to schedule their professional HKICS examination technique workshops learning and studies more flexibly, economically and in an The Institute will organise a series of three-hour IQS examination environment-friendly manner. Detailed arrangements have been technique workshops from late April 2017. These workshops sent to students for information via email. aim to help students improve their examination techniques. The workshop fee is HK$500 each. Students may download the For further questions regarding the online study packs, please enrolment form from the Studentship section of the Institute’s contact Karin Ng at: 2830 6010, or Ruby Ng at: 2830 6006, or website: www.hkics.org.hk. email: [email protected]. For technical questions regarding
IQS seminar on Hong Kong Corporate Law The Institute will organise an IQS seminar on Hong Kong Corporate Law for registered students on Thursday 27 April 2017. Dr Davy Wu, Senior Lecturer, Department of Accountancy and Law, Hong Kong Baptist University, will be the speaker. The workshop will explain the rationale and compare the key provisions of the Companies Ordinance (Cap 622) and also discuss the implications of the related listing rule changes. Students may download the enrolment form from the Studentship section of the Institute’s website: www.hkics.org.hk.
April 2017 42 Student News
Tips from subject prize awardees Subject prize awardees from the December 2016 IQS examination This was her first attempt at the Hong Kong Corporate Law paper. diet share their study experiences and tips on preparing for the IQS For examination preparation, she studied all the past examination examinations. papers available and the court cases on relevant topics to reinforce her memory. She also took the examination preparatory course Lam Kwan Yee, Queenie (subject prize awardee, Hong Kong and found the course notes very useful. She suggests that Corporate Law) candidates should read the examiners’ reports to get more familiar Ms Yee graduated with a BBA in professional accountancy from with the application of relevant court cases in different scenarios. The Chinese University of Hong Kong. She is currently working in a big four audit firm. Ms Yip points out that the IQS examinations cover a wide range of technical topics, including rules and regulations, which are Ms Yee was encouraged by a friend to study for the essential to anyone involved in compliance work. Furthermore, Chartered Secretarial qualification as a good opportunity to the role of company secretary in providing independent and equip herself with professional knowledge and advance her career technical advice to the board of directors is better recognised development. nowadays. Attaining the Chartered Secretarial qualification will therefore enable her to broaden her career perspectives and This was her first attempt at the Hong Kong Corporate Law advance her career development. paper and her strategy for preparing for the examination was to concentrate on learning the study pack together with the notes Siu Wing Shan, Stephanie (subject prize awardee, Hong Kong prepared by herself outlining the study focus of each chapter. She Corporate Law) also reviewed the past examination papers and jotted notes from Ms Siu graduated with a bachelor’s degree in accountancy from past legal cases to better understand the trend of examination the City University of Hong Kong. She is currently working as an questions. She found the Institute’s study materials very useful accountant in a commercial firm. covering the relevant fundamental knowledge of the subject area. She also mentioned the importance of having a study partner Ms Siu was encouraged by her boss to attain the Chartered who can collaborate on notes preparation and discussion of Secretarial qualification following the rapid expansion of her examination techniques. company and the increasing demand for qualified company secretarial work. Her study strategy was to focus on learning the Yip Shui Man (subject prize awardee, Hong Kong whole study pack and the past five years of examination papers. Corporate Law) She reviewed the past examination questions on relevant topics. Ms Yip graduated with a bachelor’s degree in professional accountancy from The Chinese University of Hong Kong. She is This was her first attempt taking the Hong Kong Corporate Law currently working as a Financial Controller and Company Secretary paper and she found the Institute’s study materials useful. Thanks in a GEM-listed company in the telecommunications industry in to her in-depth study of the reference materials, she was able to Hong Kong. work out the answers more easily during the examination. She also points out that candidates with relevant working experience Ms Yip chose to study for the Chartered Secretarial qualification will find it easier to prepare for the examination – in particular in to add value to her current work as a company secretary in a listed terms of their familiarity with the roles of the chairman, directors company. A good knowledge of the topics covered by the IQS and committees. examinations – including corporate governance, the listing rules, the Companies Ordinance etc – is essential to her daily work.
April 2017 43 Student News
Studentship
‘Passing the Torch’ project 2017 The Institute partnered with the Hong Kong University of Science and Technology (HKUST) and the Centre for Holistic Teaching and Learning of the Hong Kong Baptist University (HKBU) to run the ‘Passing the Torch’ project for 2017. This project, sponsored by The Hong Kong Institute of Chartered Secretaries Foundation (the Foundation), aims to promote better knowledge of business ethics and corporate governance among Dr Brian Lo Paul Yeung Polly Wong undergraduates.
1. At HKUST On 15 February, 22 February and 1 March 2017, Institute fellow Dr Brian Lo FCIS FCS; Paul Yeung, Commission Secretary, Commission Secretariat, the Securities and Futures Commission; and Institute Education Committee Vice-Chairman Polly Wong FCIS FCS(PE), Company Secretary and Financial Controller, Dynamic Holdings Ltd; delivered three lectures on real-life cases and best practice recommendations to over 140 HKUST students to enhance their knowledge of ethical standards at both the individual and corporate levels. At the ceremony
2. Award Presentation Ceremony 2017 On 1 March 2017, HKBU students gave Marketing; and Dr Eva Wong, Director of at HKBU a presentation about their school visit Centre for Holistic Teaching and Learning Four selected student groups, comprising experience at the ‘Passing the Torch’ of HKBU. Institute Council member and 25 HKBU students under the ‘Passing the Award Presentation Ceremony at the Education Committee Chairman David Torch’ project, visited different secondary HKBU campus to the Institute Council Fu FCIS FCS(PE) also presented the schools to pass on their knowledge gained and Committee members, as well as Dr participation certificates and awarded from the project to secondary school Albert Chau, Vice-President for Teaching honorariums, issued by the Foundation students with designed scenarios via and Learning; Dr Henry Fock, Head and to these four HKBU student groups in mobile app in February 2017. Associate Professor, Department of the project.
April 2017 44 Student News
Joint Professional Career Day 2017 On 11 March 2017, a Professional Career Day was jointly organised by the Young Coalition Professional Group of the Hong Kong Coalition of Professional Services (HKCPS) and Education Bureau of the Government of the HKSAR at Belilios Public School, with Eric Ma Siu Cheung JP, Development Secretary of the Government of the HKSAR as the Guest of Honour.
About 200 secondary school students participated in the career sharing sessions arranged by the professional bodies under HKCPS. The Institute introduced the Chartered Secretarial profession and career path to the students via an interactive session conducted by Institute members Cavan Cheung ACIS ACS, Eric Fung ACIS ACS, May Lam ACIS ACS and Rachel Ng ACIS ACS. Institute Past President From left to right: Rachel Ng, Candy Wong, Dr Maurice Ngai, Eric Ma Siu Cheung, May and a director of HKCPS Dr Maurice Ngai FCIS Lam, Cavan Cheung, Eric Fung FCS(PE) also attended the opening ceremony of the event.
HKICS/HKU SPACE programme series: Corporate Administration in PRC (new module) The HKICS/HKU SPACE programme series in PRC corporate practices offers a new Date and 3, 10, 17, 24 June 2017 (Saturdays) Time: module – ‘Corporate Administration in PRC’. 2.00pm – 5.00pm and 6.00pm – 9.00pm Up to 18 HKICS ECPD points will be awarded HKU SPACE Learning Centre on Hong Kong Island to participants who attain 75% or more Venue: (to be confirmed) attendance. Speaker: Dr Liu Juan (劉娟博士) For more information, please contact HKU Associate Professor, College of Public Management, SPACE at: 2867 8317, or email: prcprogramme@ South China Agricultural University hkuspace.hku.hk
April 2017 45 Student News
Studentship (continued)
Student Ambassadors Programme A. Summer Internship The Institute invites companies and organisations to offer summer internship positions to local undergraduates under its Student Ambassadors Programme, with the aim to promote the Chartered Secretarial profession to the younger generation in Hong Kong. The internship period will last for a maximum of eight weeks from June to August 2017.
Members who are interested in offering HKICS student ambassadors at Vistra Corporate Services (HK) Ltd summer internship positions this year, please visit the Events section of the B. Visit to Vistra Corporate Services (HK) Ltd institute’s website: www.hkics.org.hk. The Institute organised a visit to Vistra Corporate Services (HK) Ltd for its student For details, please contact Jonathan Ng ambassadors on 2 March 2017. The students learned about corporate services, company at: 2830 6019, or email: student@hkics. formation services and career opportunities at Vistra during the visit. org.hk. The Institute would like to thank Vistra for its support of the programme.
HKICS professional seminar The Institute organised a professional seminar for students of The Chinese University of Hong Kong to promote the Chartered Secretarial profession on 6 March 2017. Institute Council member and Education Committee Chairman David Fu FCIS FCS(PE) gave a presentation to the students on the role of the company secretary and corporate governance.
David Fu presenting to students at The Chinese University of Hong Kong
Policy – payment reminder Studentship renewal Exemption fees Students whose studentship expired in February 2017 are Students whose exemption was approved via confirmation letter reminded to settle the renewal payment by Wednesday 26 in February 2017 are reminded to settle the exemption fee by April 2017. Saturday 20 May 2017.
April 2017 46 Bulletin Board
HKICS responds to new AML/CFT proposals
The Institute has made submissions to Companies Registry is in a better position on a proposal to amend the Companies the two government consultations on than the current regulator (the Narcotics Ordinance (Cap 622) to, among other legislative proposals to enhance the anti- Division), to understand CSP practices and things, improve the transparency of money laundering and counter-terrorist should be the lead AML/CFT regulator for beneficial ownership of companies financing (AML/CFT) regime in Hong Kong. the CSP sector. incorporated in Hong Kong.
Licensing of corporate service The Institute makes a number of The Institute’s submission supports providers recommendations in response to the the establishment of an ultimate beneficial The Proposal on Enhancing Anti-Money consultation proposals, principally raising ownership register in respect of Hong Kong Laundering Regulation of Designated a caveat concerning the mechanism companies. Its principal recommendation Non-Financial Businesses and Professions for licensing CSPs. The Institute has in response to the consultation proposals consultation sought views on a proposal reservations with the proposal to allow concerns the question of whether to make to amend the Anti-Money Laundering any natural person over 18, who is not an the register of persons with significant and Counter-Terrorist Financing undischarged bankrupt and not having control (PSC) available for public (Financial Institutions) Ordinance (Cap committed certain offences, to be licensed inspection. The Institute believes that the 615) to, among other things, improve the as a CSP. The submission argues in PSC register should only be accessible to supervision of designated non-financial favour of the imposition of fit and proper competent authorities, that is, local law businesses and professions (DNFBPs). requirements for individuals wishing to enforcement agencies. be licensed as CSPs. The Institute’s submission states that The Institute’s submissions are available on it supports the need for licensing of Enhancing the transparency of the Institute’s website: www.hkics.org.hk. corporate service providers (CSPs), as beneficial ownership The government consultation documents a class of DNFBPs, with the Companies The Proposal on Enhancing Transparency are available on the Financial Services Registry being the lead regulator in this of Beneficial Ownership of Hong Kong and the Treasury Bureau website: respect. The Institute believes that the Companies consultation sought views www.fstb.gov.hk.
The Exchange updates its enforcement strategy
The Stock Exchange of Hong Kong Ltd to cooperate with the Exchange’s soon as possible, it has now been expanded (the Exchange), has announced revised investigation, remain as themes. to become delayed trading resumption themes for enforcement of the listing rules which also covers prolonged trading halts. and published a revised policy statement The initial themes concerning late financial on its approach to enforcement. In 2013, reporting resulting from internal control Inaccurate, incomplete and/or misleading the Exchange adopted five themes for its deficiencies and ‘heavily’ qualified accounts disclosure in corporate communications; enforcement activity to focus resources have now been merged and expanded to failure to comply with procedural on particular areas of concern. Following a become financial reporting – delays, or requirements in respect of notifiable/ review, the Exchange’s Listing Committee internal controls and corporate governance connected transactions; and repeated has approved a modification and expansion issues. As for the initial theme concerning breaches of the listing rules have been of this enforcement strategy. failure of issuers (subject to prolonged introduced as new themes. trading suspension) and their directors to Directors’ performance of fiduciary address the Exchange’s concerns in a timely More information is available on the duties, and failure of issuers and directors manner to procure trading resumption as Exchange website: www.hkex.com.hk.
April 2017 47 Bulletin Board
Mandatory electronic filing of disclosure of interests notifications and reports
The Securities and Futures (Amendment) This new e-filing requirement is To facilitate the filing of the notifications Ordinance 2014 (Commencement) Notice designed to improve the timeliness of and reports, the Securities and Futures 2017 was gazetted last month. The the publication of such information on Commission is refining the filing forms, Commencement Notice aims to bring the website of Hong Kong Exchanges and plans to publish them in April 2017. into effect on 3 July 2017 Part 4 of the and Clearing Ltd. Currently, disclosure of There will be no change in the scope of Securities and Futures (Amendment) interests notifications and reports may be information required to be filed under the Ordinance 2014, which mandates filed by hand, by post, by fax or by email. existing law. disclosure of interests notifications Also, corporate insiders and substantial and reports by corporate insiders and shareholders of listed corporations will no More information is available on the substantial shareholders of listed longer be required to submit notifications website of the Financial Services and the corporations to the Stock Exchange of of their interests and short positions to Treasury Bureau: www.fstb.gov.hk. Hong Kong under Part XV of the Securities the relevant listed corporation. The Stock and Futures Ordinance to be filed Exchange will provide the notifications it electronically. receives to the relevant listed corporation.
Hong Kong to join the Asian Infrastructure Investment Bank
The Asian Infrastructure Investment Bank shares (amounting to about $1.2 billion, application. The Panel is supportive of (AIIB), a multinational development bank payable over five years) and 6,121 shall be the government’s plan to seek funding designed to provide financial support for callable shares. approval from the Finance Committee infrastructure development and regional (FC) in the second quarter of 2017. Once connectivity in Asia, announced last The government hopes that Hong Kong’s the FC’s approval is obtained and the first month that Hong Kong will become a participation in the AIIB can create new instalment paid, Hong Kong will formally new member upon deposit of the first opportunities for relevant sectors and can become a new member of the AIIB. instalment of capital subscription with the further reinforce Hong Kong’s position as bank. At the end of 2016, the AIIB advised a premier international financial centre. More information is available on the that Hong Kong might apply to join the It briefed the Panel on Financial Affairs of website of the Financial Services and the bank with a subscription of 7,651 of its the Legislative Council on 16 March 2017 Treasury Bureau: www.fstb.gov.hk. shares, of which 1,530 shall be paid-in on the relevant details of the membership
Companies Registry launches mobile app
The Companies Registry (CR) has launched its ‘CR eFiling’ mobile application to facilitate registered users of the e-Registry to submit commonly filed specified forms using smartphones and mobile devices.
More information is available on the CR website: www.cr.gov.hk.
April 2017 48 We are looking for company secretarial professionals to join our Corporate Services Division as Officers / Supervisors / Managers to cope with our fast growing practice.
Requirements:
Degree holder;
Registered Student or Member of HKICS;
At least 4 years’ working experience in handling company secretarial matters of Hong Kong-listed Human Resources Department companies, preferably with sizeable professional firms or listed companies; Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong or by Basic knowledge of Hong Kong listing rules and email to: [email protected] or other relevant regulatory requirements for both by fax to 2543-7124. listed and non-listed companies is essential;
Self-motivated, well-organized and detail-minded;
Excellent command of spoken and written English with fluent spoken Mandarin;
Computer literate. Knowledge in ViewPoint will be an advantage;
Candidates with relevant experience will be considered for a position commensurate with experience.